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Investing.com - BofA Securities has reduced its price target on Lululemon Athletica Inc. (NASDAQ:LULU) to $300 from $370 while maintaining a Buy rating on the athletic apparel retailer. According to InvestingPro analysis, the stock appears undervalued at current levels, with strong fundamentals including a 59.3% gross profit margin.
The price target adjustment reflects what BofA describes as a "tougher macro backdrop," though the firm believes the recent stock selloff presents "a particularly good opportunity to own a strong growth company with high margins." This view is supported by InvestingPro data showing 9.4% revenue growth and a healthy current ratio of 2.28, indicating strong liquidity. Get access to 10+ more exclusive ProTips and comprehensive analysis with InvestingPro.
BofA notes that Lululemon is currently trading at less than 12 times forward P/E (F26E), which represents an all-time low valuation for the company, suggesting the market anticipates a significant earnings reduction.
The research firm has adjusted its valuation methodology, now basing its price objective on 20x P/E rather than the previous 14x EV/EBITDA approach, to standardize with other growth stocks in its coverage.
BofA believes if Lululemon can execute on its second-quarter sales growth target of 7-8% and maintain similar guidance for the second half of the year, the stock could experience a positive re-rating.
In other recent news, Lululemon Athletica reported a 7% increase in total revenue for the first quarter of 2025, reaching $2.4 billion, despite facing tariff challenges. The company’s net income was $315 million, translating to $2.60 per diluted share. These earnings figures suggest a steady performance for the quarter. Meanwhile, Morgan Stanley has lowered its price target for Lululemon to $223 from $280, maintaining an Equalweight rating. The firm expressed concerns over the lack of a positive sales trend in the Americas, which it does not expect to improve in the second quarter of fiscal 2025. These recent developments provide investors with insights into Lululemon’s current financial health and market outlook.
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