On Friday, BMO Capital Markets adjusted its price target for Lululemon Athletica Inc. (NASDAQ: NASDAQ:LULU), increasing it to $302 from the previous $265, while keeping a Market Perform rating on the stock. The adjustment follows Lululemon's report of a top-and-bottom line beat, with U.S. sales remaining flat and gross margin improving due to better product margin and stable markdown levels.
The company's management has provided sales and earnings per share guidance that exceeds analysts' expectations at the higher end. This guidance comes after a year in which the company's forecasts had consistently been set below market expectations. The new price target reflects approximately 20 times the expected fiscal year 2025 earnings.
BMO Capital recognizes Lululemon as a strong brand but expresses concerns about its valuation, considering it overstretched. The firm notes that while the market's general skepticism may lead to short-term positive reactions to good news, there are worries about the brand's long-term prospects as it aims to expand further.
The analyst's commentary indicates that while Lululemon's recent performance has been solid, with sales and earnings per share guidance looking optimistic, the market's cautious stance on the company could lead to volatility. The revised price target suggests that the analyst sees potential in the stock but remains cautious about Lululemon's ambitious growth plans.
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