What another green day today! SPY has raised 1.7% and Tech sector has increased 2.88%, leading by Facebook and Amazon stock. Although I think tech stocks would be the hot stocks that have high growth potential in the next 5 years, but I feel like the space is situated and the price level is too high to get in now.
So I would like to look for opportunities in some other industries. As -[I just moved recently I realized how many makeup and skincare products I’ve been cumulated through the years! So today I would like to talk about a stock in the cosmetics industry — Ulta beauty, ticker symbol is $ULTA.
The stock has grown 1306% in the past 10 year, which is even more than the growth of Amazon (1286%)!
According to their 10-K report in 2019, Ulta Beauty is the largest beauty retailer in the US and their business is to sell makeup, skin care, fragrance, hair care and salon services. That is to say, they are the platform to link the manufacturers/seller and end consumers. They offer more than 25,000 products and their loyalty program has more than 30 million members!
There are some pros and cons about the company
Pros:
- The platform for one-stop-shop for all kinds of beauty products, high-end as well as drug store ;
- Recently due to bankruptcy of Neiman Marcus and JC Penny, some of the previous customers of these 2 stores may shift to Ulta Beauty as a substitute; Also since people are trying save cash nowadays, some people may shift to Ulta from Sephora;
- Some Ulta exclusive products or exclusive collaboration may bring in the traffic (like some Korean niche brands like TonyMoly, COSRX, BanilaCo)
Cons
- As the economic shut down, their retail and salon business may be affected, which accounts for large portion of their revenue;
- Other new start-up competitors like Glossier, Courlorpop may create a buzz in social media and thus attract customers attention away;
- As the company already has big market share, the growth may slow down in the next 5 years
The current stock price is $213, and the P/E ratio is around 17., and forward PE ratio is 27, so I would be confident that the stocks price will likely increase back to $300 in the next 5 years. But right now I will not buy in, I would like to wait a little bit for a good price to buy and then hold for a long time.
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