Ulta Beauty (ULTA 11.65%) Shares received a facelift on Thursday after The Wall Street Journal reported that mega-investor Warren Buffett had shown interest in the company. Citing public documents magazine noted that Buffett’s Berkshire-Hathaway (BRK.A 0.82%) (BRK.B 0.71%) has purchased 690,106 shares of Ulta stock since its last 13F filing with the Securities and Exchange Commission.

What is Buffett planning?

According to the magazineBuffett’s Ulta stake was worth $266 million at the end of June, when the stock was trading at about $380. Unfortunately for Buffett, Ulta’s share price then fell to $320 – but things are looking much better now.

As news of the billionaire’s interest spread today, shares of the cosmetics company rose about 12% by 12:40 p.m. ET. At $368 and some change, Ulta stock still isn’t worth as much as Buffett paid for it, but it’s nearing breakeven.

Is Ulta stock a buy?

Now the question is, can Ulta’s stock price sustain the momentum generated by today’s news? The answer to that question is: maybe.

Last quarter’s earnings report wasn’t particularly encouraging. Ulta only reported 3.4% sales growth when it reported first-quarter 2024 results in May, and half of that growth came from new store openings. The retailer’s sales at existing stores grew just 1.6%. Worse, earnings per share fell 6% – the opposite direction you’d expect with rising sales. That’s because operating margins fell 210 basis points to 14.7%.

Ulta responded to the bad news by lowering its full-year sales forecast and cutting its store sales forecast nearly in half, to about 2.5 percent. The news on earnings was even worse: Ulta forecast that operating margins would continue to shrink, likely falling to 14 percent or less.

On the plus side, Ulta still plans to spend $1 billion this year buying back shares, so management must agree with Buffett that the stock is undervalued. Ulta stock is only 12.5 times earnings today, so both could be right.