BofA Just Deemed Ulta Beauty a High-Quality Compounder. Time to Buy the 26% Pullback?

An expert steadfast conscionable enactment its stamp of support connected a battered user name. Bank of America (NYSE:BAC) expert Lorraine Hutchinson upgraded Ulta Beauty (NASDAQ:ULTA) banal to Buy from Neutral with a $685 terms people connected May 5, arguing that blimpish fiscal 2026 guidance has reset expectations and created a much charismatic introduction into a high-quality compounder. Ulta Beauty shares present commercialized astir 26% disconnected the 52-week high, and the steadfast sees that pullback arsenic the opportunity.

For prudent investors, the Bank of America telephone reframes a guidance-driven selloff successful ULTA banal arsenic a accidental to ain a market-share gainer astatine a comparative discount. The setup hands diligent buyers a sanction with durable loyalty economics astatine a much tenable multiple.

The Analyst's Case

Hutchinson's thesis hinges connected a elemental idea: Ulta Beauty is investing to compound net powerfulness implicit time. The pullback has "brought elevated capitalist expectations down to earth" and creates an "opportunity to put successful a precocious prime compounder astatine a discount to peers," she wrote.

The expert who called NVIDIA successful 2010 conscionable named his apical 10 stocks and Ulta Beauty wasn't 1 of them. Get them present FREE.

Her caller transmission work, she added, gives much assurance that Ulta Beauty is utilizing investments to "build a flywheel to thrust maturation alternatively of conscionable moving connected a treadmill to support up." That favoritism matters due to the fact that Ulta Beauty's selling, general, and administrative (SG&A) expenses roseate to 26% of income from 23% past quarter, the enactment point that spooked the market.

Company Snapshot

Ulta Beauty is the largest U.S. specialty quality retailer, blending wide and prestige nether 1 extortion with a heavy loyalty programme and the precocious acquired U.K.-based Space NK. Ulta Beauty's Q4 FY2026 results delivered net per stock (EPS) of $8.01 versus $7.15 expected connected $3.9 cardinal successful revenue, up 12% twelvemonth implicit year, with comparable income up 6%.