Shares of Ulta Beauty (ULTA) are on the rise after Piper Jaffray analyst Erinn Murphin upgraded the stock to Overweight on the heels of her firm's teen survey, which indicated beauty spending was reaccelerating. Further, the analyst noted that Ulta has returned to the number one spot as the preferred shopping destination for average-income females. BUY ULTA BEAUTY: In a research note this morning, Piper Jaffray's Murphy upgraded Ulta Beauty to Overweight from Neutral and raised her price target for the shares to $236 from $212 as she is incrementally positive on the name and on the beauty industry in general. Piper's 35th semi-annual teens survey, which includes 6,000 teens across 40 states with an average age of 16, showed an improving backdrop for beauty spending led by skincare, where Ulta has 21% of its sales. While the analyst pointed out that Sephora remains the number 1 shopping destination among upper-income females, she noted that the survey showed that Ulta has reemerged as the number 1 destination for average-income females at 33% share. Murphy told investors she views this particularly positively given what she believes is an overblown investment-community concern on the "repacking/reselling" of cosmetics at Ulta. Further, the analyst argued that Ulta appears to be well positioned to benefit from the increasing popularity of the specialty channel with teens. The Ulta reward program increased in popularity, with the gap between Ulta and Sephora loyalty programs narrowing by 18%, she pointed out. Additionally, Murphey highlighted that she did not see the level of reacceleration she anticipated from brands like Fenty, a competitive threat to Ulta. WHAT'S NOTABLE: In a separate research note this morning, Piper Jaffray's Murphy noted that her firm's 35th semi-annual Taking Stock With Teens survey indicated that, overall, teen spending is up year over year and sequentially, which she believes reflects underlying economic strength. Multi-year gainers video games, beauty, and restaurants appear set to continue taking wallet share, while fashion remain relatively stable with recent trends, she added. According to the survey, the biggest brand gainers were Ulta, Activision Blizzard (ATVI), Adidas (ADDYY), Amazon (AMZN), Apple (AAPL), Hanesbrands' (HBI) Champion, Electronic Arts (EA), Kering's (PPRUY) Gucci, lululemon (LULU), Supreme, Tommy Hilfiger (PVH), VF Corp's (VFC) Vans, Starbucks (SBUX), Take-Two (TTWO), and Tarte, while the largest brand losers were Nike (NKE), Converse, eBay (EBAY), Estee Lauder (EL), Fosil (FOSL) and Ralph Lauren (RL). PRICE ACTION: In morning trading, shares of Ulta Beauty have gained almost 4% to $220.06.
