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Ulta Beauty Shares Enjoy a Big Run; What Could Blow Them Back?

By Charley Blaine

Investing.com - Ulta Beauty shares have had a great run, up 41% on the year and 54% since the bottom of the stock market's fourth-quarter plunge.

Ulta is the fifth-best performer of stocks in the Nasdaq 100 Index this year. It has hit 52-week highs for three-straight days. But the last seemed to generate a small pause that pulled shares back slightly on Thursday, albeit they still enjoying a small gain.

The Bolingbrook, Ill.-based Ulta (NASDAQ:ULTA), founded in 1989, has been growing rapidly and profitably. It sells cosmetics, beauty products and skincare products for men and women in stores and online. Each store has a salon.

Earnings of $3.61 a share in the fourth quarter of fiscal 2018 were up 6.2% from a year earlier and 31% if you take out the one-time effects of the 2017 tax law.

Revenue was up 9.7% in the quarter to $2.1 billion and 14.1% to $6.71 billion for the full year.

It sees $12.50 to $12.85 a share in earnings in the 2019 fiscal year, up from $10.94 in the last fiscal year and expects to open 80 new stores. At the end of 2018, Ulta operated 1,174 stores in all 50 states. That's up from 675 stores at the end of 2013.

It has a robust balance sheet with no debt. The company bought $616.2 million in shares in the 2018 fiscal year alone, compared with capital expenditures of $319 million, according to the company's fourth-quarter earnings release.

That's all well and good and the growth is expected to continue. Of 24 analysts who watch the stock, 18 rate it a buy.

The stock price is the issue. When 52-week highs are reached regularly, getting more gains from a stock becomes harder, especially if the economy softens.

The consensus 12-month target from analysts polled by Investing.com is $349.52, implying upside of just 0.9%.

While one analyst sees the stock hitting $390, one of the seven who are neutral see it maybe dropping to $300. There are no analysts who see the stock as a sell.

Technical indicators are starting to show some sell flashes and that's because of the speed of the run-up.

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