Beauty is still beautiful

Ulta Beauty (ULTA), a beauty products company, has enjoyed a great up run in the past 10 years as I presented early last year. Here is what I said in Mar 2017: Of course I’m not saying Ulta around $285 is cheap but you rarely get a cheap price for a great stock. Maybe just put Ulta on your radar screen and jump in if someday it gets sold, especially with the overall market selloff. It is definitely a momentum stock that may continue its uptrend for long time! In the following 3 months  ULTA continued to march up to its all time high of $310, then something dramatic happened in the rest of the year.  It got haircut for over 30%, largely due to increasing concerns of the Amazon effect that has almost universally occurred to all the retailers.  While we cannot underestimate Amazon’s disruptive power that can indeed destroy many weak retailers, it is a bit overreaction to the impact on many strong retailers as they won’t simply sit on their hands to do nothing. As we have seen what happened to Walmart, Target, and Costco, they are working very hard as well to effectively enhance their online sales to compete with Amazon.  Same to Ulta Beauty. Per their latest earning report, sales up 19%. same-store sales up 10.3% and more importantly,  e-commerce up 63%. I think Ulta will be doing fine moving forward, even with Amazon’s competition. 

While I was waiting for a better entry point for Ulta since my blog in Mar last year, I certainly did not expect it would have crashed so much in the following months. When it finally dropped below $200 briefly and started to show positive divergence with MACD in Oct/Nov last year, I figured its bottom has been hit and would likely start its new uptrend. I’m happy that I took the opportunity to buy when everyone was selling, a clear contrarian move. It is a bit surprising how fast it has recovered from its low in the past few weeks. It seems it has broken out from its immediate resistance around $230ish, reaching its recent high of $245. Technically it is very likely that ULTA may check back to test this breakout line (now its support). If so, buying ULTA around 230 is not a bad idea for its next leg up. Ultimately it may likely to break out its all time high and go much further up from there.

 

This has  very much reminded me of my Boeing contrarian call a couple of years ago when it got crashed due to overreacted concerns. Since then, Boeing has been more than doubled! I think ULTA has a similar potential moving forward!!