Few things are more agonizing for Cramer than watching a stock he likes lose its momentum.
“When a fast-growing, high-flying momentum name breaks, it turns into a falling knife that will cut anyone who tries to catch it on the way down,” he said. “For most of the last 10 months, that has been the exact story of Ulta Beauty.”
Ulta’s slowing growth has made its stock a total roller-coaster, unable to make a real bounce. But after the cosmetics company reported a weaker-than-expected quarter last week, the stock surged — a “very bullish sign,” Cramer said.
“In fact, it’s a classic tell of a bottom, because it signals that your weak-handed fellow shareholders have at last capitulated,” he continued.
And when Ulta’s management talked about their plans to make growth-boosting investments on the post-earnings conference call, Cramer regained his confidence in the makeup play’s prospects.
“All things considered, I think Ulta Beauty is back,” he said. “Even after the latest bounce, I recommend buying some because the stock has fallen to levels where it’s become too cheap to ignore.”