Sally Beauty (SBH) delivered a "decent" Q2 execution, but implied H2 comparable sales deceleration put its topline into question, Morgan Stanley said in a Tuesday report.

The report said the firm is benefitting from strategic initiatives and Fuel for Growth savings, but the positive earnings revision story has largely peaked.

Incremental pressure from elevated gas prices could also create additional downside risk to demand due to the company's higher exposure to a lower-income consumer, the note added.

"With Fuel for Growth savings set to moderate by end of FY'26, the next leg of EBIT growth increasingly depends on sustained demand acceleration, where visibility is limited," the report said.

Morgan Stanley cut its price target to $13 from $16 while maintaining its underweight rating on the stock.

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