More Ulta Issues | InvestED Podcast |

InvestED Episode #467: More Ulta Issues
As investors the world over grapple with the rapidly changing financial landscape, where ETFs, meme stocks, and cryptocurrencies are all carving out their own space in a well-established ecosystem, how do value investors gauge the future of a business?
While some might see these changes as a massive disruption to the market at large, there are others who, from a Buffett perspective, see the same cycle of boom/bust/reset playing out as it’s done so many times in the past.
This week, Phil and Danielle continue from their jumping off point of the cosmetics industry to tell us why the difference between growth and value stocks isn’t nearly as significant as establishing the value of the business in order to plan for the future.
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[@mehrdadmithra9591]

Always nice to see/listen your podcasts, has been very enjoyable to listen and learn from you, many thanks.

[@Ajay-qz9sk]

Thank you for your research. I find your videos are well done. RIght now I'm keeping an eye on Eledator

[@davidjmazur]

It would seem to me that assuming that revenue drops like a brick because some would not buy a $95 Tom Ford lipstick assumes no substitution between brands. Why wouldn’t someone substitute a $75 Dior lipstick, also available at Ulta? And how much of the revenue mix is those highest tier brands to begin with? My understanding is that Sephora over indexes on the highest tier brands more than Ulta does.

[@jeffkramer1365]

I care more about the consumer reliance on the product. During recessions women still need makeup because of jobs, job interviews, and other life events...so then the question becomes where can they get cheaper products? On the flip side, during a downturn a consumer doesn't necessarily need a burrito from Chipotle. They can get a McChicken, a banana, ramen noodles, hotdogs etc. I think with a downturn, Sephora people shift from high end lipstick to lower end lipstick but they go more to a place like ULTA, Target, Wal-Mart etc. because they still need the product. You also have to look at consumer loyalty to a particular brand and who sells all of these brands. The argument that there is a great reset has to apply to both Chipotle's growth as well as Ulta's growth not just to one while the other isn't affected. So if there is a great reset there has to be an assumption that both stop being bought and growth falls.

[@barretxcr]

Chipotle is about to 50:1 split... to make it that 64$/share, seems a good time for first timers to get in. Especially if goes back to 3k/share. Thoughts?

[@PhilTownRule1Investing]

Thanks for the question! When a company performs a stock split, what is being split is the stock price. The way that the stock price is split is by adding more shares. In the case of Chipotle, the number of shares being added is 50 times the number of current shares. What that means is instead of there being 27.5 million shares outstanding, there will now be 50 times that amount, or 1.375 billion shares outstanding. Now that the number of shares outstanding has changed, all of the per share metrics will also change. Essentially everything will be divided by 50. As an example, if CMG has a book value of $100/share pre-split, post-split the book value would be $2/share.
In terms of valuing the business, a stock split doesn't change much for us because a stock split does not put a company on sale. If CMG is currently priced at $3000/share, and our on sale price is $1000/share, following the stock split CMG would be priced at $60/share, and our on sale price would be $20/share. The stock split doesn't place the company on sale, it only reduces the share price by increasing the share count.

[@gamingwithshubh4400]

You definitely have my sub. This content is next level. For me Eledator was the turning point. Please keep doing what you do and keep being you, love it.