On Wednesday, Morgan Stanley (NYSE:MS) analysts adjusted their outlook on Lululemon Athletica Inc. (NASDAQ:LULU), reducing the price target from the previous $420.00 to $411.00. Despite this change, the firm maintained an Overweight rating on the apparel company’s shares. According to InvestingPro data, the stock appears undervalued based on its Fair Value analysis, with analyst targets ranging from $194 to $500.
The adjustment comes amid expectations of potential earnings per share (EPS) upside for the fourth quarter of 2024. The company has demonstrated strong financial performance, with impressive gross profit margins of 58.85% and revenue growth of 10.84% over the last twelve months. However, Morgan Stanley analysts anticipate that the management might opt for a more conservative or below-consensus guidance for the fiscal year. This caution is driven by the uncertain health of the US consumer market and the unpredictable effects of new product introductions in the Americas.
Morgan Stanley’s stance reflects a broader sentiment of caution seen across the softlines sector, where forward guidance has generally not met expectations. The analysts noted that investor positioning has become more bearish, and the expectations for Lululemon’s performance have been moderated compared to a month ago.
The firm suggests that the commentary from Lululemon’s management regarding the fourth quarter and future prospects in the Americas will be crucial in determining the short-term trajectory of the stock. The new price target of $411.00 takes into account these factors and the current market environment.
In other recent news, Lululemon Athletica Inc. is preparing to release its financial results, with analysts expressing varied outlooks on the company’s performance. Piper Sandler has maintained an Overweight rating, emphasizing a significant 26.1% year-over-year increase in credit card data for February, and highlighting the positive reception of new product launches. However, the firm anticipates a potentially cautious outlook for fiscal year 2025 due to economic uncertainties. Meanwhile, Truist Securities has reiterated a Buy rating, citing Lululemon’s strong brand momentum on TikTok and improved product assortment as key factors driving optimism. Stifel also supports a Buy rating, focusing on the anticipated rebound in the U.S. women’s segment, which is crucial to Lululemon’s revenue. Erste Group has initiated coverage with a Buy rating, praising Lululemon’s strong sales growth, operating margin, and return on equity compared to competitors. The firm’s analysts have noted an upward revision in Lululemon’s earnings per share forecast, suggesting potential for further gains. These developments come as the company continues to navigate a competitive market landscape.
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