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Investing.com - BTIG has lowered its price target on Lululemon Athletica Inc. (NASDAQ:LULU) to $375 from $405 while maintaining a Buy rating ahead of the company’s second-quarter earnings report. According to InvestingPro data, the company maintains impressive gross profit margins of 59.3% and shows strong financial health with a current ratio of 2.28.
The athletic apparel retailer is scheduled to report its Q2 earnings on September 4, after market close, with BTIG expecting results to be relatively in line with expectations. The firm noted that while there is potential for full-year guidance to be revised downward due to higher tariffs and sluggish U.S. performance, many analyst estimates are already below the company’s guidance. The company has demonstrated resilient profitability with a return on equity of 42% over the last twelve months.
BTIG highlighted that Lululemon’s U.S. topline growth has turned positive but remains constrained at low single digits, despite the company returning to historical levels of product newness. This performance has contributed to a significant retreat in valuation, with multiples approximately 60% below peak levels and at the bottom of the peer group. The stock has experienced a substantial 44% decline over the past six months, and InvestingPro analysis suggests the stock is currently undervalued based on its Fair Value model.
The current valuation suggests the market views Lululemon as having reached maturity, combined with concerns about competitive threats and the unwinding legging trend. BTIG believes this market perspective discounts remaining growth opportunities in the U.S. from improved execution, potential gains in the men’s business, and continued international expansion. For deeper insights into LULU’s valuation and growth prospects, including 10+ additional ProTips and comprehensive financial analysis, visit InvestingPro.
BTIG has modestly reduced its full-year estimates for Lululemon based on lower U.S. growth projections and higher tariffs, but maintains its Buy rating on the stock despite the price target reduction. The company trades at an attractive PEG ratio of 0.73, suggesting potential undervaluation relative to its growth prospects.
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 recorded at $315 million, translating to $2.60 per diluted share. These earnings results highlight Lululemon’s steady growth amidst external pressures. Additionally, BofA Securities has adjusted its price target for Lululemon to $300 from $370, maintaining a Buy rating due to what it describes as a "tougher macro backdrop." Meanwhile, Morgan Stanley has also lowered its price target to $223 from $280, keeping an Equalweight rating on the stock. The firm expressed concerns about the lack of positive sales momentum in the Americas, which it does not expect to improve in the second quarter of fiscal 2025. These recent developments offer investors insights into Lululemon’s current market position and challenges.
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