Ulta Beauty is About to Undergo a Major Change

BofA reiterated a Buy rating on Ulta Beauty (ULTA) and set a $685 price target, citing potential revenue recapture as Target shop-in-shop GMV shifts back to Ulta. The firm estimates $650M in prior GMV and models 20% to 60% recapture adding $130M to $390M revenue, starting Q3 2026, with 100 to 315 bps annual growth impact.

US stocks retreated as markets scaled back hopes for US-Iran peace. US MBA mortgage applications fell 2.5% (purchase -2.9%, refi -2.3%); the 30-year fixed rate dropped 8 bp to 6.57%. The Fed Beige Book was hawkish, citing slight-to-moderate growth and higher inflation; John Williams said no rate change is needed. Traders priced a 3% chance of a 25 bp hike.

Ulta Beauty reported Q1 commentary from its earnings call: performance was broad-based, with prestige gaining share and mass roughly flat. February comparable sales rose low double digits; March-April were low single digits, driven by mid-teen e-commerce and low-single-digit stores. Fragrance led with high-teen growth; gross margin rose 100 bps to 40.1%. Operating profit rose 11.6% to $448M; net income to $340M. Ulta maintained FY26 sales outlook (6%-7%) and raised operating profit growth to 6.5

Overseas markets were mixed: Euro Stoxx 50 fell 0.63%, China’s Shanghai Composite rose 0.22%, and Japan’s Nikkei hit a record up 2.50%. US 10-year yields rose to 4.489% after US-Iran tensions pushed WTI up 1% and May ADP employment surprised higher. Stocks: software and private credit slid; chipmakers gained.

U.S. stock index futures were muted as investors weighed Middle East developments and upcoming data. The ISM manufacturing index rose to 54.0 in May (vs 53.3 expected) and construction spending increased 0.4% m/m in April. Fed June pricing implies a 98.4% chance of no change. Traders also await JOLTS and earnings from Palo Alto Networks, Dollar General and Ulta.

U.S. stocks opened lower as tech sold off in favor of defensives: Nasdaq and Dow each down about 0.6% in early trade, with S&P down <0.5%. Alphabet increased its equity financing to up to $84.75B (from $80B). SpaceX is reportedly pricing 555.6M shares at $135 to raise about $75B. ADP said May private jobs rose 122k.