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On Friday, BTIG analysts adjusted their outlook on Lululemon Athletica Inc. (NASDAQ: NASDAQ:LULU), reducing the price target to $405 from $420, while maintaining a Buy rating. This adjustment comes in response to revised guidance that accounts for increased tariffs, with the second quarter identified as a period of particular pressure. According to InvestingPro data, seven analysts have recently revised their earnings estimates upward for the upcoming period, with analyst targets ranging from $194 to $500.
The analysts noted that while Lululemon’s first-quarter performance slightly exceeded expectations in terms of revenue and gross margin, the focus has shifted to the company’s outlook. Management has lowered its guidance, citing the need to account for incremental tariffs and conservatively assuming higher markdowns, despite current trends showing lower markdowns year-over-year. InvestingPro data reveals impressive gross profit margins of 59.22% and an overall financial health score of "GREAT," suggesting strong fundamental positioning despite near-term pressures.
The revised guidance does not factor in potential improvements in the Americas, despite inventory levels supporting new product developments throughout the year. The analysts described this cautious approach as prudent given the uncertain economic environment. Additionally, a slowdown in China, partially attributed to shifts in the timing of the Chinese New Year, poses a risk to the company’s top-line guidance.
The guidance also anticipates an increase in selling, general, and administrative expenses, though the analysts believe there may be some flexibility in this area. Despite these challenges, BTIG analysts expressed confidence in Lululemon’s ability to gain market share and capitalize on execution opportunities specific to the company, reiterating their Buy rating.
In other recent news, Lululemon Athletica Inc. reported first-quarter earnings per share (EPS) of $2.60, surpassing the guidance range of $2.53 to $2.58, with revenue reaching $2.371 billion. Despite beating expectations, Lululemon lowered its EPS forecast for the fiscal year to a range of $14.58 to $14.78, citing tariff impacts and a challenging international market. Analysts from Needham, BofA Securities, Stifel, BMO Capital, and Citi have all adjusted their price targets for Lululemon, reflecting concerns about tariffs and international sales slowdowns. Needham lowered its target to $317, while BofA Securities set theirs at $370, and Stifel at $324. BMO Capital and Citi set their price targets at $250 and $270, respectively, each maintaining varied ratings from Buy to Neutral. The company has faced a deceleration in international sales, particularly in China, where growth slowed to 8% from 27% in the previous quarter. Management has reiterated its full-year revenue guidance but expressed concerns over margin pressures and slower domestic growth. Despite these challenges, Lululemon remains optimistic about new product performance and plans to address tariff-related pressures.
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