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Investing.com - UBS has lowered its price target on Lululemon Athletica Inc. (NASDAQ:LULU) to $240.00 from $290.00 while maintaining a Neutral rating on the stock. According to InvestingPro analysis, the stock appears undervalued at current levels, trading near its 52-week low of $185.95.
The firm believes Lululemon experienced lackluster U.S. sales momentum through August month-to-date and generated approximately 1% U.S. sales growth in the second quarter. Despite recent challenges, the company maintains impressive gross profit margins of 59.3% and generated $10.7 billion in revenue over the last twelve months.
UBS anticipates Lululemon will reduce its fiscal year 2025 earnings per share guidance by 20 cents from the current $14.58-$14.78 range due to tariffs and related cost headwinds. InvestingPro data reveals that 7 analysts have recently revised their earnings estimates downward. Get access to 12 more exclusive InvestingPro Tips and comprehensive analysis for LULU.
The market already expects a similar outcome, according to UBS, which is why the firm doesn’t expect Lululemon’s second-quarter report to significantly impact the company’s price-to-earnings ratio.
The options market is pricing in a plus or minus 3.5% move around the earnings event, below Lululemon’s historical average move of plus or minus 9.5%, with UBS expecting less volatility than the historical average.
In other recent news, Lululemon Athletica Inc. has announced the opening of its first Italian store in Milan, which spans approximately 5,700 square feet over two floors. The store will feature collections for various activities such as yoga, running, and golf. Meanwhile, Wells Fargo (NYSE:WFC) has adjusted its price target for Lululemon to $225, citing potential further reductions in earnings estimates. Piper Sandler also lowered its price target to $200, highlighting increased competition from brands like Alo and Vuori, particularly in key U.S. states and Canada.
Jefferies has reduced its price target to $160, expressing concerns about growth as Lululemon expands in Italy while Alo Yoga plans to enter the Rome market. Additionally, Evercore ISI has decreased its price target to $265 and removed Lululemon from its Top 5 Outperform list, replacing it with Ulta Beauty (NASDAQ:ULTA). These developments reflect ongoing challenges and strategic moves for the athletic apparel retailer.
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