Ulta Beauty Inc (NASDAQ:ULTA) is gaining renewed investor confidence as Jefferies upgraded the beauty retailer to Buy, citing improving momentum in makeup demand, better merchandising execution, and a more disciplined cost outlook.
The brokerage set a price target of $700, implying a valuation of roughly 22 times earnings, and said the risk-reward profile has turned more favorable after a period of skepticism baked into the stock.
At the core of the upgrade is a strengthening outlook for makeup, which Jefferies described as the highest-velocity category in beauty and accounts for about 38% of Ulta’s sales. The firm pointed to rising consumer engagement in products such as blush and concealer, supported by Google Trends data showing a spike in search interest, alongside a rebound in Ulta’s earned media value in the first quarter that outpaced Sephora, according to Tribe Dynamics data.
Jefferies said conviction is building that the category is entering a sustained upswing, potentially marking an early-cycle shift that could extend beyond fiscal 2026.
Beauty cycles typically last around five years, the firm noted, suggesting more durable support for traffic and purchase frequency at Ulta.
The report also highlighted an improvement in merchandising execution following changes in leadership. Previously, Jefferies had flagged concerns that Ulta’s assortment leaned too heavily on legacy brands that are widely available through Amazon and off-price channels, limiting differentiation.
That dynamic, the firm said, is shifting. Ulta is now accelerating the addition of newer and trend-led brands, moving from “gap-filling” to more proactive assortment building. Management, according to Jefferies, now believes its core brand portfolio is largely in place and is focusing on more differentiated, incremental additions aimed at capturing emerging demand.
Jefferies described Ulta’s positioning as an “index fund of beauty,” arguing that its broad price ladder from mass to prestige gives it a structural advantage as consumers increasingly mix premium and value purchases. Mass retailers, in contrast, lack prestige exposure, while Sephora skews more heavily toward higher-end products.
While the firm had previously questioned whether Ulta’s brand mix could fully capitalize on category breadth, it said recent improvements in curation and assortment are narrowing that gap.
Jefferies added that even modest margin gains, combined with more predictable cost discipline, are sufficient to support a stronger earnings durability outlook at current valuation levels.