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On Wednesday, Evercore ISI made a significant adjustment to the price target on shares of Lululemon Athletica Inc. (NASDAQ:LULU), reducing it to $320 from the previous target of $440. Despite this change, the firm maintained its Outperform rating on the athletic apparel company’s stock, which currently commands a market capitalization of $30.8 billion and trades at an attractive P/E ratio of 17.4x relative to its growth potential.
Evercore ISI’s assessment suggests that the current 10% tariff situation is manageable for well-established brands. The firm’s analysis indicates that Lululemon’s performance in the first quarter remains consistent with its fourth-quarter report, supported by impressive gross profit margins of 59.2% and a healthy current ratio of 2.16. Additionally, the company has already secured its inventory for the first half of the year onshore, which provides some insulation against immediate tariff impacts.
The firm also highlighted Lululemon’s flexible inventory strategy, noting that the company’s significant proportion of core products and its history of utilizing air freight allow it to make second-half inventory decisions later. This strategic approach enables Lululemon to observe the evolving tariff situation before making critical choices. InvestingPro analysis reveals 12 additional key insights about LULU’s financial health and market position, available exclusively to subscribers.
In response to inquiries about the recent dip in U.S. consumer sentiment, Lululemon acknowledged the potential for a recession scenario to exert more pressure on its higher-income core consumer base compared to the unique downturn experienced during the COVID-19 pandemic. However, Evercore ISI’s maintained Outperform rating suggests a continued positive outlook on Lululemon’s stock performance in the face of these challenges. According to InvestingPro’s Fair Value analysis, the stock currently appears undervalued despite its year-to-date decline of 33%.
In other recent news, Lululemon Athletica Inc. reported notable developments impacting its financial outlook and stock ratings. CFRA upgraded Lululemon’s stock rating to Strong Buy, citing a robust fourth-quarter performance where the company exceeded earnings and revenue expectations with a Q4 EPS of $6.14 and revenue of $3.68 billion. Meanwhile, Piper Sandler revised its price target to $280 and maintained a Neutral rating, reflecting concerns about earnings and sales growth, as well as margin pressures due to tariffs. Truist Securities also lowered its price target to $297 but retained a Buy rating, highlighting Lululemon’s strong brand momentum despite tariff challenges.
Argus analysts downgraded the stock to Hold, pointing to growth concerns, an aging product line, and increased competition from other brands. In contrast, Bernstein adjusted its price target to $405, maintaining an Outperform rating, while noting macroeconomic pressures affecting Lululemon’s recovery momentum. These recent developments underscore varying analyst perspectives on Lululemon’s ability to navigate economic challenges and competitive pressures.
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