Is Ulta Beauty Stock Going To $485? 1 Wall Street analyst thinks so.

The ultimate beauty (ULTA -0.12%) recently attracted a lot of attention due to the large stake unexpectedly acquired by Warren Buffett Berkshire Hathaway. With a higher profile, the cosmetics retailer is also gaining attention from a group of analysts, with one of those pundits recently changing their price target on the stock.

Reduced target price; optimistic position maintained

Baird’s Mark Altschwager recently cut his price target to $485 per share from $525 previously. However, that doesn’t make him an Ulta bear, as he believes the retailer still has plenty of upside even at a reduced level — it’s 28% higher than the stock’s most recent closing price, so maintained its overweight (ie, buy) recommendation.

Altschwager’s new approach to the company came less than a week before it was scheduled to release its second-quarter results. Analysts’ expectations are quite modest ahead of Thursday’s report. Collectively, numerous experts following Ulta stock now model an 8% year-over-year decline in earnings per share (EPS) to $5.52, although they are counting on revenue to rise 4% (to 2.62 billion USD).

Forecaster Baird cut its own estimates for the quarter, citing “jittery demand indicators” and assertive promotional activity that tends to weigh on margins. However, at the company’s current low valuations “we continue to see good risk/reward for a high-quality name, but patience may be required.”

A solid player no matter what

I think Altschwager — and Buffett, for that matter — are on to something here. Retail is a tough game, but Ulta competes in an interesting way with its salon-in-store model and its extensive selection of products across all segments, price points and categories. It also has a very effective loyalty program that is not easy to build or maintain even for the best retailers.

Admittedly, the fundamentals of the near future don’t look so hot. But again referring to analyst Barid’s opinion, Ulta is cheap enough these days in valuations to try. I think this stock has significantly more upside than downside and is worth considering for any portfolio.