Lululemon stock target cut to $302 at BMO Capital

On Friday, BMO Capital Markets adjusted its outlook on Lululemon Athletica Inc. (NASDAQ:LULU), lowering the price target to $302 from $313, while retaining a Market Perform rating on the stock. The revision follows the company’s fourth-quarter financial results, which revealed earnings and revenue that surpassed expectations. Currently trading at a P/E ratio of 20.88x with a market capitalization of $35.1 billion, InvestingPro analysis suggests the stock may be undervalued. Despite the positive performance, Lululemon’s guidance for the first quarter and the full year raised some concerns among investors.

According to BMO Capital’s analysis, Lululemon’s U.S. sales showed slight growth on a 52-week basis, with impressive gross margins of 58.85% due to better product margins and fewer markdowns. InvestingPro data reveals the company maintains a "GREAT" financial health score, supported by strong profitability metrics. However, the company’s forward-looking statements indicated lower than expected projections for the first quarter and earnings per share for the fiscal year 2025, despite revenue forecasts aligning with the high-end of expectations.

The firm’s commentary highlighted Lululemon as a robust brand but expressed caution regarding its valuation, considering the potential challenges in long-term growth for domestic and women’s segments. The analysts at BMO pointed to a need for the brand to further expand its reach while being mindful of the risks associated with such growth strategies.

BMO Capital’s revised price target of $302 is based on approximately 20 times the projected fiscal year 2026 earnings, reflecting a cautious stance on the company’s future performance. The guidance provided by Lululemon’s management suggests a conservative outlook for the near term, with an emphasis on strategic initiatives to sustain growth in the longer run. For deeper insights into LULU’s valuation and growth prospects, InvestingPro subscribers can access comprehensive research reports with detailed analysis of the company’s financial health and future potential.

Lululemon Athletica Inc., known for its high-end athletic apparel, has been navigating the competitive retail landscape while striving to maintain its market position and brand strength. With a revenue growth of 10.84% and strong return on equity of 46%, the company demonstrates solid fundamental performance. The company’s latest financial results and subsequent analysis by BMO Capital Markets will be closely watched by investors as Lululemon continues to adapt to market dynamics and consumer trends.

In other recent news, Lululemon Athletica Inc. reported a 13% year-over-year increase in revenue for the fourth quarter, alongside earnings per share (EPS) of $6.14, surpassing some analysts’ expectations. Despite this strong performance, the company’s fiscal year 2025 guidance suggests a more conservative outlook, with anticipated revenues between $11,150 million and $11,300 million and adjusted EPS ranging from $14.95 to $15.15. This has led several analyst firms to adjust their price targets for the company. Truist Securities reduced its price target to $380 while maintaining a Buy rating, citing potential profitability opportunities despite challenges. Piper Sandler also cut its price target to $315, keeping a Neutral rating, and noted that U.S. growth prospects remain muted. KeyBanc Capital Markets lowered its target to $400 but maintained an Overweight rating, expressing confidence in the company’s strategic initiatives. Stifel adjusted its target to $424, keeping a Buy rating, highlighting Lululemon’s history of outperforming expectations. UBS reduced its price target to $335, maintaining a Neutral rating, and expressed skepticism about the company’s growth acceleration. These developments reflect varying analyst perspectives on Lululemon’s future performance amid macroeconomic pressures.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.