Ulta’s Beautiful Q1 Earnings Report Points to More Gains Ahead

Written by Dan Schmidt

Customers weren’t the only ones getting blowouts from Ulta Beauty Inc. (NASDAQ: ULTA) last week, as the company blew away expectations in its Q1 2025 earnings report, released Thursday after the final bell.

The top and bottom lines beat expectations, wowing analysts and investors alike, and shares soared more than 11% to close out the month of May.

The stock is now up more than 30% since closing under $310 per share on March 13, but how much upside remains for the high-end beauty chain? Despite murky technicals and the constant threat of new tariffs, Ulta’s comparable sales growthand strategic initiatives should position the stock for a solid second half in 2025.

A Blowout Quarter Driven by Impressive Comp Sales Growth

It’s been a rocky few months for Ulta, and even Warren Buffett tapped out on his holdings a few months ago. However, a turnaround has been underway since March, and peeling back the earnings onion shows why investors pushed Ulta shares so much higher on Friday. The company reported $2.85 billion in net sales for the quarter ending May 3, a 4.5% year-over-year (YOY) increase that exceeded the analyst consensus of $2.79 billion. The $6.70 EPS number also smashed expectations by $0.97, but the real driver was surprisingly strong comparable sales growth.

Comparable sales include revenue from stores that have been open for at least 14 months, as well as online sales. Analysts had been expecting tepid comparable sales growth in Q1, as the company had stocked up on inventory for new initiatives, and sentiment surveys showed an increase in cost-conscious consumers. However, Ulta’s high-end clientele didn’t receive that memo, as comparable sales growth surged past expectations.

Wall Street had projected comp sales growth of 0.2%, but the company reported a 2.9% YOY increase, driven by larger ticket sizes and a 0.6% increase in transaction volume. The impressive sales growth enabled the company to comfortably beat expectations despite actually seeing a slight margin decrease (39.1% gross versus 39.2% the previous year).

CEO Kecia Steelman reported fragrances were the best-performing category with double-digit sales growth, followed by single-digit growth from skincare. Services also saw single-digit sales growth, which is one area where Ulta has an advantage over competing retailers like Sephora, which don’t offer in-store services. While comp sales growth and a massive EPS beat were at the heart of the rally Friday, it’s the guidance update that could fuel the stock even higher.

A Strategic Guidance Raise Amidst Tariff Uncertainty

Like many consumer-facing companies, tariffs and uncertainty were hot topics during the call. CFO Paula Oyibo mentioned that while uncertainty continues to make guidance projections difficult, only 1% of the company’s merchandise comes from direct imports. While ULTA stock isn’t expected to face much margin pressure from tariffs, continuing economic uncertainty is likely to weigh on consumers, and executives sought to express an attitude of cautious optimism about the rest of the year.

CEO Steelman was quick to note that one quarter doesn’t equal a trend, but the 2025 FY guidance raise was strategic in tempering expectations while still raising estimates. The company increased the upper bound of its sales, comps, and EPS projections while keeping the lower bound range unchanged.

• Net Sales: $11.5 billion to $11.7 billion, up from $11.5 billion to $11.6 billion
• Comp Sales: 0% to 1.5%, up from 0% to 1%
• Diluted EPS: $22.65 to $23.20, up from $22.50 to $22.90

The expanding ranges give the company wiggle room should the economy deteriorate in the second half of the year, but also space for upside surprises if macro conditions improve. The Ulta Beauty Unleashed plan also will continue to be implemented throughout the year, which now includes a loyalty program with 45 million members and a marketing strategy riding the successes of a Super Bowl campaign, a partnership with Beyoncé, and the release of 19 new brands exclusive to Ulta stores.

Soaring Price Targets Covering Complicated Technicals

Analysts were out in force following Ulta’s earnings report, with no less than 10 firms boosting price targets following the impressive beat. Notable price target hikes came from Morgan Stanley, Robert Baird, and JPMorgan Chase, all of whom now project upside of 11% to 17% from the stock’s closing price on Friday.

Even firms with Neutral ratings like Piper Sandler and Citigroup boosted price targets, but the stock chart shows that some profit taking should be expected over the next few sessions.

The stock has retraced more than 50% of its decline from the all-time high close of $567 back in March 2024, and a Golden Cross is forming as the 50-day moving average breaches the 200-day moving average for the first time since January.

But the Relative Strength Index (RSI) has now popped over 78, hinting that the rally is overbought and investors may look to take profits following the blowout earnings report. If upward momentum wanes over the next few sessions, better entry points present themselves in the days or weeks ahead.

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Top 3 ETFs Defense Hawks Are Buying

Written by Nathan Reiff

Global military spending is accelerating, with total worldwide military expenditures for 2024 estimated at $2.72 trillion. This marks a 9.4% increase in real terms over 2023 levels and the sharpest year-over-year (YOY) rise in decades. While spending in the major military powers of the United States, Russia, China, Germany, and India still accounts for the majority of total defense spending, budgets in other parts of the world are also increasing, particularly given instability in the Middle East and concern in Europe about the escalation of Russia’s invasion of Ukraine.

Defense hawk investors who believe this trend is likely to continue may be inclined to invest in aerospace and defense firms that are most likely to benefit from increased military spending. Individual investments in this area are accessible for U.S. investors but less so for international defense companies. Hawkish investors seeking broader international exposure to the defense space might consider a dedicated and expansive exchange-traded fund (ETF)targeting this industry.

Targeted Global Defense Exposure in a Popular Fund

The Global X Defense Tech ETF (NYSEARCA: SHLD) has more than $2 billion in assets under management (AUM), making it one of the largest and most popular defense-focused ETFs. SHLD includes about 40 holdings with companies in the industrials, cybersecurity, AI, and drone systems spaces.

The fund is fairly concentrated, with positions in German automotive and arms manufacturer Rheinmetall AG (ETR: RHM)and U.S.-based Palantir Technologies Inc. (NASDAQ: PLTR) together accounting for more than 21% of the portfolio. Just over half of the portfolio is given over to U.S. companies, with Germany, France, Britain, and South Korea among the other markets best represented.

SHLD offers an expense ratio of 0.50%, which is somewhat high for a passively managed fund but understandable given its global exposure and specialized theme. What’s more, the fund’s performance in recent months has likely more than made up for its fee—SHLD has returned nearly 52% year-to-date (YTD) and 69% in the past 12 months.

North American and European Focus With a New Fund

The Themes Transatlantic Defense ETF (NASDAQ: NATO) is a fund specifically focused on aerospace and defense stocks headquartered in the 32 North Atlantic Treaty Organization (NATO) member countries across Europe and North America. NATO’s portfolio includes more than 70 companies, and the largest position is under 9% of total assets.

This makes the fund somewhat more diversified than SHLD above, even as it has a more narrowly focused geographical purview. NATO is also almost exclusively focused on industrials names, while SHLD gives over a portion of its portfolio to software and AI companies with defense interests as well. More than two-thirds of NATO’s portfolio is made up of U.S. companies, with France and the U.K. making up the bulk of the remainder.

NATO comes in ahead of SHLD when it comes to fees, as it has an expense ratio of just 0.35%. Having launched last October, it has a limited performance history, but it has generated returns of about 32% YTD. However, with an AUM of around $24 million and a one-month average trading volume hovering around 17,000, investors may find liquidity to be an issue here more so than for SHLD.

High-Risk, High-Reward 3X Defense Leverage

Direxion Daily Aerospace & Defense Bull 3X Shares Fund (NYSEARCA: DFEN) is a fund reserved for defense investors comfortable taking on a high degree of risk. This ETF provides an opportunity for investors anticipating a short-term rally in U.S. defense stocks, offering daily 3X leveraged exposure to a bucket of about 38 companies. Like SHLD above, DFEN is fairly concentrated, with the top two positions representing more than a quarter of assets invested.

As with other leveraged funds, DFEN is not designed to be held longer than a single day of trading. This means it may be a viable option for investors holding one of the defense funds above long-term but seeking additional targeted exposure in anticipation of an intraday rally in this industry.

Due to its leverage and unique focus, this fund has a higher expense ratio of 0.95%. It also has the highest degree of leverage available in defense ETFs, but there are alternatives providing 2X exposure for investors interested in taking on a more moderate degree of risk.

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Zscaler Will Hit $360 Soon: Here’s the How and Why

Written by Thomas Hughes

Zscaler’s (NASDAQ: ZS) share price is expected to reach $360 due to technical price action, favorable analyst sentiment, and the results driving it. The latest price action has this market breaking out to new highs, confirming not only the near-term uptrend but also breaking the market out of a long-term trading range.

The trading range was in place due to valuation concerns and risks of slowing growth. The breakout occurred because the business fundamentals are catching up to the valuation, leading to an improved outlook. That is for sustainable 20% growth, free cash flow, and improving shareholder value.

Regarding the soon in this forecast, the technical action suggests this move could be completed by late this year or by early 2026. The target is due to the magnitude of the trading range, which, in this case, is a minimum target. The price action has broken to new highs robustly and may consolidate well above the critical support target, indicating that a bull-case scenario is in place.

The market could rise to a new all-time high in that scenario due to the magnitude of the recovery rally currently underway. Using it to project targets puts this market in the range of $375 to $403, sufficient for a new high and a likely precursor to even higher highs.

Here’s why.

Zscaler Wows the Analysts With Fiscal Q2 Results

Analyst activity in Zscaler was tepid for more than a year, with price target reductions and generally poor responses to results hampering the price action. Then Bam! Zscaler reports its FQ3 2025 results, and the analyst’s attitude shifts. MarketBeat reported 24 revisions from the 36 analysts tracked by its platform, including a few reiterated price targetsbut more increases than decreases.

There were no decreases tracked. The result is a 17% increase in the consensus price target within days of the release, a 25% increase relative to last year, and most revisions leading to the high-end range. The consensus assumes that fair value is near the June opening price levels, but the high-end range adds 15% to it.

At $320, it is still well below the $375 to $400 high-end technical target, but a step in the right direction that could easily turn into a trend, assuming upcoming reports are equally good.

The takeaway from the analysts’ reports is that the results are solid despite macroeconomic uncertainties that negatively impacted guidance for competitors. The strength in Q3 is expected to carry over into Q4, leaving the company with momentum heading into the next fiscal year. New products help the platform carry momentum, and the new Z-Flex is expected to do the same.

Z-Flex is a new purchasing model that allows businesses to streamline adjustments to their security stack, reducing costs while improving flexibility and scalability.

Zscaler Had a Solid Q3 Despite Slowing Growth

The only bad news coming out of Zscaler’s Q3 report is that growth slowed to the low 20% range. However, the revenue exceeded the analysts’ forecasts, growth topped 20% for another quarter, and was further bolstered by accelerated gains in billings and deferred revenue.

Other key highlights for investors to focus on include the 21% increase in net income, an 18% free cash flow margin, and a 25% cash build-up on the balance sheet. Regarding the balance sheet, Zscaler has more than $3 billion in cash and equivalents, and equity is rising, up 41% year-to-date in F2025.

Regarding the guidance, the company forecasts billings in alignment with the analysts’ consensus forecast, leaving the Q3 strength to carry through to the full-year result, and it may be cautious.

The final piece of the puzzle is the sell-side interest, including short-sellers and institutional investors. The institutions, as a group, own a solid but still small 41% of the stock as of early June, but have been buying it on balance throughout the year. That provides a solid support base and tailwind for price action now amplified by short-covering.

The short interest ahead of the release wasn’t astronomically high at 9%, but it had risen in previous reports and was at a long-term high, setting the market up for a short-covering rally if not a short-squeeze.

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