On Wednesday, Raymond (NSE:RYMD) James analyst Rick Patel reaffirmed an Outperform rating on Lululemon Athletica Inc. (NASDAQ:LULU) with a steady price target of $430.00. According to InvestingPro data, the company maintains impressive gross profit margins of 58.85% and currently appears undervalued based on its Fair Value analysis. Ahead of Lululemon’s fourth-quarter earnings report scheduled for March 27, Patel expressed confidence that the company’s results and fiscal year 2025 guidance would likely meet or slightly exceed market expectations.
Patel’s optimism is based on various channel checks for the fourth quarter and the first quarter to date, including mobile app data, store traffic, and Google (NASDAQ:GOOGL) Trends, which indicate solid year-over-year growth for both periods. This aligns with InvestingPro’s analysis, which reveals the company’s strong revenue growth of 10.84% over the last twelve months and an excellent overall financial health score. The analysis of product reviews for Lululemon’s new Glow Up line compared to its core Align (NASDAQ:ALGN) line shows promising customer reception. Although Glow Up has fewer SKUs and reviews, its average rating of 4.0 stars is close to Align’s 4.2 stars, suggesting it could attract new and repeat customers.
Despite the positive outlook, Lululemon shares have seen a 13% decline year-to-date, driven by concerns over growth amid an uncertain consumer environment. However, with a current ratio of 2.0 and moderate debt levels, the company maintains strong financial flexibility. Patel notes that competitor Alo’s mobile app data indicates strong year-over-year growth. Discover 10+ additional exclusive insights about LULU’s financial health with a subscription to InvestingPro.
In response to foreign exchange changes, Raymond James has raised its estimates for Lululemon. The firm models fiscal year 2025 revenue growth in line with Wall Street expectations at approximately 8%, accounting for a roughly 150 basis point headwind due to a 53rd week. Earnings per share are projected to increase by 8%, slightly above consensus, with conservative expectations for margin upside.
Patel highlighted the attractiveness of Lululemon’s price-to-earnings ratio, which is currently around 19 times the fiscal year 2026 forecast, compared to a five-year average of roughly 35 times. This valuation is seen as favorable given Lululemon’s significant potential for international expansion. Concluding his commentary, Patel reiterated a bullish stance on the athletic apparel retailer’s stock.
In other recent news, Lululemon Athletica Inc. has been the focus of several analyst reports, each offering insights into the company’s financial outlook and market positioning. Morgan Stanley (NYSE:MS) recently adjusted its price target for Lululemon from $420 to $411, citing potential earnings per share upside for the fourth quarter of 2024, though they anticipate conservative guidance due to market uncertainties. Despite the price target cut, Morgan Stanley maintained an Overweight rating, reflecting cautious optimism. Piper Sandler also maintained an Overweight rating with a $420 price target, highlighting a 26.1% year-over-year increase in February sales, driven by positive consumer responses to new product launches.
Meanwhile, Truist Securities reiterated a Buy rating with a $460 price target, noting Lululemon’s strong presence on TikTok and the positive impact of its product innovations. The firm sees the company’s social media engagement as a critical driver of its current market momentum. Stifel also maintained a Buy rating, setting a price target at $438, focusing on the anticipated rebound of Lululemon’s U.S. women’s business, which is expected to support sustained revenue growth. The firm’s analysis points to well-received early product launches as indicators of a positive shift in the company’s merchandising strategy.
These recent developments underscore a mix of cautious optimism and confidence among analysts regarding Lululemon’s potential for growth and market performance. Investors are closely watching for the company’s upcoming earnings report to further assess its financial health and strategic direction.
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