The shares of Ulta Beauty Inc (NASDAQ:ULTA) have put in a strong performance since bottoming at an eight-month low near $225 in late December, up 37% at $308.39. There could be more upside in store for the beauty expert, too, considering it's been one of the best stocks to own in March, looking back 10 years.
Specifically, data from Schaeffer's Senior Quantitative Analyst Rocky White shows Ulta Beauty stock averaging a March gain of 9.82% over the last decade, with 90% of those returns positive. Another move of this magnitude would put near $339 next month, based on its current perch.
The highest ULTA shares have ever traded is $322.49, which they tagged on Nov. 19. The stock's recent rally has it back within striking distance of this notable milestone -- and a capitulation from some of the weaker bearish hands could create even bigger tailwinds.
Ulta Beauty options traders, for instance, have bought to open puts over calls at a quicker-than-usual clip in recent weeks. This is based on the stock's 10-day put/call volume ratio of 1.29 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 84th annual percentile.
And while short sellers have already started covering, there's still plenty of bearish bets to be unwound. Short interest plunged 20.3% in the most recent reporting period to 2.17 million shares, or 3.6 times ULTA stock's average daily pace of trading.
Those looking to bet on more upside with options may want to consider further-dated options, considering Ulta Beauty's earnings report is expected in mid-March, and front-month contracts are pricing in elevated volatility expecations. At last check, the implied volatility term structure on monthly March options is 42.4%, compared to 33.2% for the back-month April series.