ULTA Pre-earnings Analysis
Chart done on hourly timeframe. ULTA is set to report earnings this week and they have a hefty target to reach as profits are expected to rise by 50% quarter over quarter. The beauty giant will be reporting their holiday sales numbers so the optimistic estimates are reasonable, but their stock is trading around all time highs so even if they beat, it might already be priced in. The company’s revenue has also declined quarter over quarter in 2023, potentially foreshadowing an earnings miss. Despite a decline in revenue and net income, ULTA shares jumped after their last quarter earnings and continued rallied until about a week ago. There doesn’t seem to be a good reason for the full quarter rally so we’re skeptical going into these earnings. The company is currently trading at a price to earnings ratio of 22, which is on the higher end of the healthy 15-25 range. They’ll need to either come down in stock price, or raise their net income in order to justify the current valuation.
Options chain analysis:
This week’s option chain is currently reflecting a 92% implied volatility, which translates to about a $46 dollar move. That means ULTA could push to around 570.00-580.00 on good earnings, or decline below its 515.00 support. If it stays flat then all OTM contracts will be crushed.