Stifel cuts Lululemon stock price target to $424, maintains buy

On Friday, Stifel analysts adjusted their outlook on Lululemon Athletica Inc. (NASDAQ: NASDAQ:LULU), reducing the price target to $424 from $438 while sustaining a Buy rating on the shares. The revision follows Lululemon’s fourth-quarter revenue and earnings per share (EPS) outperformance, which surpassed Stifel’s estimates. The company reported fourth-quarter revenue of $3.61 billion and EPS of $6.14, exceeding Stifel’s projections of $3.58 billion in revenue and $5.85 EPS. According to InvestingPro data, LULU maintains impressive gross margins of 58.85% and has earned a "GREAT" financial health score, demonstrating strong operational efficiency.

The updated guidance for fiscal year 2025 anticipates revenues between $11.15 billion and $11.30 billion, marking a year-over-year increase of 5-7%, or 7-8% when excluding the 53rd week in fiscal year 2024. The adjusted EPS forecast ranges from $14.95 to $15.15, which is a downward revision from Stifel’s prior estimates of $11.34 billion in revenue and $15.85 EPS. InvestingPro analysis indicates LULU is currently trading at a P/E ratio of 24.63, which appears favorable relative to its near-term earnings growth potential - one of several key insights available in the comprehensive Pro Research Report.

Stifel’s report highlights a cautious consumer environment in the U.S. that is anticipated to impact traffic across the industry. Despite this, the firm notes that new product launches like Glow Up, Daydrift, and BeCalm are gaining traction with customers, following some product missteps in 2024.

Lululemon’s shares are currently trading at approximately 20 times the high-end of the fiscal year 2025 estimated EPS guidance range. Stifel appreciates the conservative guidance provided by Lululemon, considering the company’s history of outperforming expectations and the presence of tangible near-term growth drivers.

In support of their Buy rating, Stifel’s target price of $424 implies a 25 times price-to-earnings (P/E) multiple on the projected fiscal year 2026 EPS of $16.95. The firm’s stance reflects confidence in Lululemon’s strategic positioning and potential for continued growth despite a challenging consumer market.

In other recent news, Lululemon Athletica Inc. reported strong financial results for the fourth quarter of 2024, exceeding Wall Street expectations. The company achieved an earnings per share (EPS) of $6.14, surpassing the forecast of $5.82, and reported revenue of $3.61 billion, beating the anticipated $3.57 billion. Despite these robust figures, concerns over inflation and slower U.S. retail traffic have weighed on investor sentiment. For 2025, Lululemon projects revenue growth of 5-7%, with expectations of a modest increase in U.S. sales and a 1% negative impact from foreign exchange.

In related developments, Evercore ISI revised its outlook on Lululemon, lowering the stock’s price target from $495.00 to $440.00 while maintaining an Outperform rating. This adjustment came after Lululemon’s financial performance exceeded fourth-quarter guidance. The company’s 2025 guidance projects EPS between $14.95 and $15.15, aligning closely with consensus estimates. Analysts from Evercore ISI highlighted positive trends in gross margins and key performance indicators related to products, which indicate a favorable consumer response to new product innovations.

Lululemon’s full-year revenue for 2024 reached $10.6 billion, marking an 8% growth, while operating margin increased by 40 basis points to 28.9%. Despite slower traffic in U.S. stores during the first quarter, Lululemon’s revenue trends in the Americas remained consistent with the fourth quarter. The company plans to continue expanding its market presence, projecting to open 40 to 45 net new company-operated stores in 2025, with a focus on international markets, particularly China.

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