Shares of Ulta Beauty (ULTA) dropped in morning trading after the cosmetics retailer was downgraded at Piper Jaffray, which cited a survey showing a slowdown in beauty spending by teenagers. Ulta had been removed from the Conviction Buy list at Goldman Sachs earlier this week and also received a price target cut at Oppenheimer yesterday.

SLOWDOWN IN SPENDING: Piper Jaffray analyst Erinn Murphy downgraded Ulta to Neutral from Overweight and cut her price target for shares to $210 from $260. In a note to clients, Murphy said her firm's Fall 2017 Teen Survey results indicated spending declines of 13% in color cosmetics among all female teenagers. While skincare declines were "less bad," down 7% year-over-year, overall beauty wallet was down low-double digits. She also noted that Piper saw broader signs of strength from LVMH's (LVMUY) Sephora, and that Sephora's Beauty Insider program has gained share while Ulta's Ultimate Rewards Program has lost share. Murphy said she is "incrementally concerned" on current category dynamics.

REMOVAL FROM CONVICTION BUY LIST: Earlier this week, Goldman analyst Matthew Fassler removed Ulta from the firm's Conviction Buy List and lowered his price target to $267 from $290, telling clients that recent data points suggest a "more complicated path to recovery." Oppenheimer analyst Rupesh Parikh this week cut his price target for Ulta to $210 from $250 as he believes sustained outperformance is "less likely" from here and sees a more competitive brick and mortar landscape in the coming quarters.

STILL A BUYING OPPORTUNITY: One analyst still seems positive on the stock, however. William Blair analyst Dan Hofkin said in a note yesterday that while he recognizes concerns surrounding slower industry growth, "the Amazon (AMZN) overhang," and the lull in the beauty industry, he believes Ulta is "differentiated" and positioned to deliver strong earnings and sales growth going forward. He does not believe Amazon is having a materially larger impact on Ulta than a year ago. Ulta also faces competition from department stores like Macy's (M), which are discounting high-end cosmetics and offering rewards, but Hofkin, who has an Outperform rating on Ulta shares, said he has not seen material changes in department stores' approach to beauty and believes they have not impacted Ulta to-date.

WHAT'S NOTABLE: In August, Ulta reported quarterly comparable sales that declined from last year. The earnings report followed "softer" commentary from L'Oreal (LRLCY) on its earnings call regarding trends in its North American beauty business, increasing promotional activity from the department store channel and more difficult year-over-year comparisons that "could now signal a potentially more challenging beauty backdrop going forward."

OTHERS TO WATCH: e.l.f. Beauty (ELF) is down 2.6% this morning after Piper's Murphy lowered her price target on shares, while Sally Beauty (SBH) is fractionally lower.

PRICE ACTION: In morning trading, shares of Ulta Beauty are down 1.25% to $199.77. Shares are down nearly 22% year-to-date.