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Ulta Beauty Inc(ULTA-Q)

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Tesla Is Falling, but Another Luxury Stock Looks More Beautiful Than Ever

Motley Fool - Fri Dec 1, 2023

The stock market had a great performance in November, and many stocks that had taken hard hits in September and October managed to rebound. Among them was Tesla (NASDAQ: TSLA), which lost more than 20% of its value between the end of August and the end of October before posting a nearly 20% gain last month.

Some investors expected that Tesla would get a boost from the release Thursday of its Cybertruck electric pickup. However, shares didn't rise yesterday and moved slightly lower in premarket trading on Friday morning. One stock that did move sharply higher, though, was Ulta Beauty (NASDAQ: ULTA). Let's look at both companies to see what's going on.

Tesla starts delivering

Shares of Tesla moved lower by between 2% and 3% early Friday morning. The maker of electric vehicles (EVs) finally began making deliveries of its Cybertruck, and it revealed key information about the pickup and how Tesla will market it.

Tesla CEO Elon Musk described the Cybertruck at its rollout event in Austin on Thursday afternoon, noting that it should be able to carry more than a ton of cargo or tow 11,000 pounds. The Cybertruck will have an estimated range of up to 340 miles and accelerate from 0 to 60 in 2.6 seconds. Musk drew favorable comparisons between the Cybertruck and sports cars, showing a drag race in which the premium version of the Tesla EV outpaced a Porsche 911 even as it towed a second Porsche.

Pricing also became available as Tesla accepted more orders. The all-wheel variant of the Cybertruck will list at $79,990 and be available for delivery in 2024, while the higher-priced "Cyberbeast" variant carries a price tag just under $100,000. Those looking for a lower price point can wait until 2025, when a rear-wheel drive version of the Cybertruck will start delivering at $60,990. Yet even those prices are higher than what Tesla had initially anticipated during the concept launch in 2019.

In the long run, Tesla's future likely hinges more on technology like its full self-driving capabilities than on any one model. Nevertheless, what happens with the Cybertruck could play a key role in affirming or rebutting the hopes that Musk has expressed about the EV truck.

Ulta stock soars on latest financial results

Making a much clearer positive move was Ulta Beauty, which saw its stock jump 11% in the premarket session Friday morning. Ulta's release of fiscal third-quarter financial results for the period ended Oct. 28 reflected the challenges in the economy but gave investors just about everything they had hoped to see.

Ulta's financial numbers were mixed. Net sales of $2.49 billion were up more than 6% year over year, with the beauty company posting a 4.5% rise in comparable sales for the period. However, a substantial increase in costs weighed on gross margin figures, and a steep rise in overhead expenses led to adjusted earnings falling 5% from year-earlier numbers to $5.07 per share.

Ulta blamed higher supply chain costs and increased levels of theft for the decline in gross margin, along with rising labor costs and marketing expenses that hurt its bottom line. However, CEO Dave Kimbell said that traffic remained at attractive levels, and the number of members in Ulta's loyalty program hit a new high of 42.2 million. Ulta also updated its full-year fiscal 2023 guidance, pushing net sales, comps, and earnings toward the upper ends of its previous range of projections.

Ulta has struggled during much of 2023, with worries that consumers will eventually have to cut back on spending. However, the latest earnings report suggests that those fears haven't yet panned out, and shareholders seem optimistic that Ulta might avoid a pullback and keep thriving as the economy tries to recover.

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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Ulta Beauty. The Motley Fool has a disclosure policy.

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