Ulta Beauty Stock Upgraded After Worst Week in 4 Years

ULTA's Wednesday bear gap occurred after warnings of slow demand

Deputy Editor
Apr 8, 2024 at 10:47 AM
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Fresh off the stock's worst week since March 2020, one analyst is betting on a bounce back from Ulta Beauty Inc (NASDAQ:ULTA). This morning, Loop Capital upgraded the cosmetics retailer to "buy" from "hold," calling last week's selloff 'overdone.' The firm also set a price target of $540, which represents an over 20% premium to current levels. 

At last look, ULTA was up 2.1% to trade at $454.18. The shares fell 15.3% on Wednesday, April 3, after CEO David Kimbell warned of slowing demand. Since the start of the year, the equity is down 7.2%. However, its 14-day relative strength index (RSI) of 20.4 sits firmly in "oversold" territory, which is typically indicative of a short-term bounce looming. 

Should investors also bet on ULTA's next move higher, options look like a good way to go. The stock's Schaeffer's Volatility Index (SVI) of 26% ranks in the low 14th percentile of its annual range, meaning options traders are pricing in low volatility expectations at the moment. 

It's also worth noting the security's Schaeffer's Volatility Scorecard (SVS) ranks at an elevated 95 out of 100. This means ULTA tends to exceed traders' volatility expectations, a boon for potential premium buyers. 




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