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On Friday, Needham analysts adjusted their outlook for Lululemon Athletica Inc. (NASDAQ: NASDAQ:LULU) by lowering the price target to $317 from $366, while maintaining a Buy rating. This adjustment follows Lululemon’s release of its first-quarter results, which were described as lackluster by the analysts. According to InvestingPro data, the company maintains a "GREAT" financial health score, with impressive gross profit margins of 59.2% and strong liquidity metrics.
Lululemon’s stock experienced a significant drop of 23% in aftermarket trading, settling around $255. This decline came despite the company’s guidance cut being relatively modest at 2.5%, which was primarily attributed to tariff impacts. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, with strong fundamentals including a healthy current ratio of 2.16 and robust revenue growth of 10.1% over the last twelve months. Management expressed optimism regarding the performance of new products, but concerns arose due to sluggish domestic business and a notable slowdown in international comparable growth during the first quarter.
The company’s first-quarter earnings per share (EPS) reached $2.60, surpassing the guidance range of $2.53 to $2.58. Comparable sales grew by 1% during the quarter. Despite reiterating its full-year outlook for top-line growth of 5% to 7%, Lululemon reduced its EPS forecast by $0.37, now projecting $14.58 to $14.78, and anticipated significant margin and EPS pressure for the second quarter. For deeper insights into Lululemon’s financial performance and growth prospects, access the comprehensive Pro Research Report available exclusively on InvestingPro, covering over 1,400 top US stocks.
In response to these developments, Needham analysts revised their EPS forecasts for fiscal years 2025 and 2026 to $14.75 and $15.85, respectively, down from previous estimates of $15.15 and $16.62. The price target adjustment reflects these revised expectations and the challenges facing Lululemon’s growth strategy.
Lululemon’s management remains focused on addressing these challenges, with an emphasis on new product performance and navigating the tariff-related pressures impacting its financial outlook.
In other recent news, Lululemon Athletica Inc. reported revenue of $2.371 billion and earnings per share (EPS) of $2.60, surpassing both Stifel’s and the broader market’s expectations. Despite this, the company lowered its EPS guidance for fiscal 2025 to a range of $14.58-$14.78, citing the impact of tariffs. The company’s second-quarter guidance was below consensus expectations, primarily due to tariffs and timing of expenses, as noted by BofA Securities. Analysts from multiple firms, including BofA Securities, Stifel, BMO Capital, Citi, and Evercore ISI, have adjusted their price targets for Lululemon, reflecting concerns over international sales and tariffs. BofA Securities and Stifel maintained a Buy rating, while BMO Capital and Citi held a Market Perform and Neutral rating, respectively. Lululemon’s international sales showed a slowdown, with China reporting only an 8% growth, down from 27% in the previous quarter. The company plans to address these challenges through strategic product launches and sourcing efficiency measures. Despite the challenges, Evercore ISI remains confident in Lululemon’s innovation strategy, projecting significant revenue growth from China in the second quarter.
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