Remember when your friend dumped someone and then immediately watched them glow up on Instagram? That’s basically what happened to Warren Buffett with Ulta Beauty (NASDAQ: ULTA), except instead of Instagram, it’s the stock market, and instead of a glow-up, it’s a 13% single-day jump that probably made the Oracle of Omaha wince a little.
Here’s the tea: Buffett’s Berkshire Hathaway bought Ulta shares in Q2 2024, then dumped them entirely by Q4. Six months. That’s shorter than most people keep their gym memberships, and definitely shorter than Buffett usually holds anything. The man who famously said his favorite holding period is “forever” basically treated Ulta like a bad Tinder date.
But plot twist – Ulta just posted earnings that would make any investor weep with regret. The beauty retailer absolutely crushed expectations, posting $2.86 billion in net sales (beating estimates by $140 million) and earnings of $5.14 per share when analysts were expecting $4.64. That’s like ordering a medium coffee and getting a venti for free.
The numbers that matter:
- Same-store sales jumped 6.3% (up from a measly 0.6% last year)
- They opened 28 new stores because apparently people still like buying mascara in person
- Gross profit shot up 15% year-over-year
- The stock is now up 41% for the year
CEO Kecia Steelman was practically doing victory laps, talking about their “Ulta Beauty Unleashed Strategy” (yes, that’s a real thing) and how their “exciting assortment newness” is resonating with customers. Translation: people are buying a lot of expensive face cream, and business is booming.
The company even raised their outlook like they’re flexing at the gym. They’re now calling for $12.3 billion in net sales for the year, up from their previous range. Operating margins got bumped up too, and earnings projections went from $23.85-$24.30 per share to $25.20-$25.50. That’s the kind of revision that makes CFOs do happy dances in empty conference rooms.
Now here’s where it gets interesting for us mere mortals who don’t have Buffett’s billions. Analysts are falling over themselves to raise price targets. UBS thinks it could hit $690 per share, while others are calling for $640-$650. That suggests potential returns of 6-14% over the next year, which isn’t exactly meme stock territory, but it’s solid.
The stock is trading at 20 times earnings, which in today’s market is practically a bargain. Compare that to some tech stocks trading at 50+ times earnings, and Ulta starts looking like the responsible choice your financial advisor would approve of.
So what’s the lesson here? Even Warren Buffett makes mistakes (shocking, I know). Sometimes the best revenge is living well – or in this case, posting killer earnings right after getting dumped. Ulta’s basically the stock market equivalent of that person who gets really hot after a breakup.
Whether you should buy in now is another question entirely. But one thing’s for sure: somewhere in Omaha, Warren Buffett is probably wondering what could have been.