Why Sally Beauty Holdings Is Running Higher at Midday

What happened

Shares of Sally Beauty Holdings (NYSE:SBH) were racing 12% higher in midday trading Tuesday after two Wall Street analysts upgraded the beauty supplies stock.

So what

Cowen analyst Oliver Chen and Oppenheimer analyst Rupesh Parikh both upgraded Sally to an outperform rating while also raising their price targets on the stock. With beauty salons reopened across the country, the personal products supplier should benefit from sales and earnings growth, the analysts said.

Chen told investors in a research note that Sally Beauty should see revenue grow due to greater sales of hair color, consumers choosing DIY personal care, and salon chair rental trends. It also has enjoyed a surprisingly robust response to its e-commerce initiatives, and Chen believes Sally’s recently depressed valuation will benefit from the omnichannel approach and the number of stores it closed.

Similarly, Parikh said value investors would especially appreciate Sally Beauty’s stock pullback as it made for an attractive entry point, citing many of the same triggers as Chen. Saying he sees strength in the beauty products supplier’s earnings potential, he said Sally was his favorite value stock.

Now what

Shares of Sally Beauty Holdings were down 25% from recent highs prior to the upgrades. The stock closed yesterday at under $19.50 per share. Chen pegged it to hit $28 a share, a 44% potential gain. Parikh assigned a $24-per-share price target, an implied 23% upside.