Ulta Beauty is likely to rally as the chain store shifts its corporate strategy to better differentiate itself from rivals and capitalize on continued demand for beauty products, according to Jefferies. The investment firm upgraded the cosmetics giant to buy from hold. It also raised its price target on shares to $700 from $635, suggesting 26.5% upside from Friday's close. "Confidence [has] improve[d] in revenue durability amid a broadening beauty backdrop and renewed makeup engagement," analyst Sydney Wagner said in a note. "Improved brand newness and merch execution better position ULTA to capitalize on the cycle, while ... expectations have been reset to a more realistic framework." The global beauty market has grown considerably in recent years — a trend that is expected to continue despite concerns that demand is cooling . The market is expected to expand by 5% annually through 2030, consulting firm McKinsey said last year . Amid that backdrop, Ulta shares have gained ground, rising roughly 55% over the past 12 months. ULTA 1Y mountain Ulta shares are up about 55% in the past 12 months. However, Amazon and other online marketplaces are jumping into the beauty fray, selling makeup from legacy brands at considerable discounts. That has pushed Ulta to search for new ways to separate itself from an increasingly crowded field of competitors, according to Jefferies. One way Ulta is aiming to differentiate itself is by adding emerging makeup brands to its shelves. "Since the change in [merchandise] leadership, ULTA has improved pace and relevance of new brand adds, moving beyond gap-filling to proactive whitespace and trend-led launches," Wagner wrote. "[Management] now views anchor brand acquisition as largely complete, shifting focus toward differentiated, accretive adds. Makeup accounts for roughly 38% of Ulta sales, Jefferies said. The analyst added that a makeup-driven business cycle should support more durable traffic and sales frequency at Ulta. It could also contribute to higher-quality revenue and incremental margin-mix opportunities for the business, pushing shares even higher in the future. "The importance of makeup cannot be overstated," Wagner wrote. "Conviction has increased in a sustained makeup upswing as validation builds across industry dialogue and alt data, reinforcing an early-cycle reset with vis beyond [fiscal year 2026], as beauty cycles typically last [roughly five years]." Jefferies' call falls in line with consensus on the Street. Of the 28 analysts covering Ulta, 18 have a buy or strong buy on shares, LSEG data shows.
