TSX up after index logs fresh record high close
Investing.com - UBS lowered its price target on Lululemon Athletica Inc. (NASDAQ:LULU) to $185.00 from $240.00 on Friday, while maintaining a Neutral rating following the company’s disappointing second-quarter results. The stock currently trades at $206.09, with InvestingPro analysis suggesting the shares are undervalued despite falling 41% over the past six months.
The investment firm cited "much worse" fundamental trends than previously anticipated, suggesting Lululemon is entering a multiyear process to revamp its operating model to restore healthy topline growth. While the company maintains impressive gross profit margins of 59.1%, InvestingPro data shows 12 analysts have recently revised their earnings expectations downward.
UBS reduced its fiscal year 2025-2027 earnings per share estimates by 11-14% and now forecasts Lululemon’s five-year EPS compound annual growth rate at approximately 3%, down from its previous 6% projection.
The firm believes this reduced growth outlook justifies a price-to-earnings ratio of 13x, noting that while the stock will likely experience a pullback following the disappointing quarterly report, it does not represent a buying opportunity.
UBS warned of "significant downside EPS revision risk," explaining that revamping operating models is challenging and time-consuming, with potential for continued downward revisions to Street numbers if Lululemon struggles with execution.
In other recent news, Lululemon Athletica Inc. reported its second-quarter financial results for fiscal year 2025, with earnings per share (EPS) of $3.10, surpassing analyst forecasts of $2.87. However, the company’s revenue of $2.53 billion slightly missed expectations of $2.54 billion. Following the earnings announcement, several analysts adjusted their outlook on the company. Evercore ISI downgraded Lululemon from Outperform to In Line, citing deteriorating key performance indicators, and reduced its price target to $180.00. Goldman Sachs also lowered its price target to $200.00, maintaining a Neutral rating due to a weak outlook and revised FY25 guidance. William Blair downgraded Lululemon to Market Perform, expressing concerns over U.S. sales recovery and tariff impacts, while Stifel downgraded the stock to Hold, reducing its price target to $205.00 amid domestic pressures. These developments highlight the challenges Lululemon faces in maintaining growth across key markets.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.