Ulta Beauty is tumbling on earnings, but one trader sees strength ahead

Investors are ditching Ulta Beauty in the extended session Thursday.

Shares plummeted 13% after hours following an earnings and revenue miss. Comparable store sales also came in under expectations.

Shares of Ulta are up more than 37% this year but still down nearly 9% from their 52-week high set in July.

Gina Sanchez, CEO of Chantico Global, says that despite increasing pressure on the broader retail space Ulta is best poised to weather the storm from a fundamental perspective.

“If you look at the way Ulta has pivoted from just bricks and mortar to more of an online offering, their latest annual report would suggest that’s going to continue to drive their growth,” she said Thursday on CNBC’s “Trading Nation. ” “So I think within the retail sector they look fantastic because beauty is very much a recession-proof commodity.”

However, Sanchez cautions investors to keep a close eye on Ulta’s valuation, which she says has become a bit too lofty.

“It’s trading at 24 times trailing valuation for price-to-earnings versus its forward PE at 9 times,” she explained. “I think that’s one of the reasons that it’s been struggling at this point, so we have to see how this valuation element shakes out.”

Bill Baruch, president of Blue Line futures, is bullish on a different beauty stock: Estee Lauder. That name has surged more than 56% this year, making it the best-performing beauty stock. However, Baruch warns that despite trading well above its 50- and 200-day moving average, Estee Lauder’s rally is only stable “as long as it stays above $195 to $197.”

Estee Lauder is still 3% away from breaking below the upper end of that range.

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