What the bad jobs report means for markets
On Friday, Stifel analysts maintained their Buy rating on Lululemon Athletica Inc. (NASDAQ: NASDAQ:LULU) but reduced the price target from $438.00 to $424.00. The adjustment follows the company’s fourth-quarter report, which revealed revenues of $3,611 million and earnings per share (EPS) of $6.14, surpassing Stifel’s projections of $3,581 million in revenue and $5.85 EPS. The company’s impressive performance is supported by a robust gross profit margin of 58.85% and strong revenue growth of 10.84% over the last twelve months, according to InvestingPro data. This outperformance was noted after a positive preannouncement in conjunction with ICR.
Despite the strong quarter, Lululemon provided a conservative forecast for fiscal year 2025, anticipating revenues between $11,150 million and $11,300 million, marking a year-over-year increase of 5-7%, or 7-8% when adjusting for the extra week in fiscal 2024. The company also projected adjusted EPS to range from $14.95 to $15.15, which is below Stifel’s earlier estimates of $11,337 million in revenue and $15.85 in EPS, as well as the previous consensus estimates of $11,301 million and $15.37. InvestingPro analysis shows the company maintains excellent financial health with a GREAT overall score, suggesting strong fundamentals despite conservative guidance. Subscribers can access 8 additional ProTips and comprehensive financial metrics in the Pro Research Report.
The company’s guidance reflects caution due to a potentially cautious consumer environment in the U.S., which could affect traffic across the industry. Nevertheless, Lululemon’s new product launches, including the Glow Up, Daydrift, and BeCalm collections, have reportedly been well received by customers, bouncing back from product missteps in the previous year.
Lululemon’s stock is currently trading at 20 times the high end of the company’s fiscal year 2025 EPS guidance. With a current P/E ratio of 24.63 and a notably low PEG ratio of 0.31, InvestingPro’s Fair Value analysis suggests the stock is slightly undervalued at its current price of $341.53. Stifel’s analysts have expressed appreciation for the company’s conservative guidance, its history of outperforming expectations, and the clear near-term growth drivers. The new price target of $424 implies a 25 times price-to-earnings (P/E) ratio based on the projected fiscal year 2026 EPS of $16.95.
In other recent news, Lululemon Athletica Inc. reported fourth-quarter earnings per share (EPS) of $6.14, surpassing the average analyst estimate of $5.88. The company also achieved a 13% year-over-year revenue growth, exceeding the consensus forecast of 11.9%. Despite these positive results, several analysts have revised their price targets for Lululemon. UBS reduced its price target to $335 from $376, maintaining a Neutral rating, while Needham adjusted its target to $366 from $430, keeping a Buy rating. JPMorgan also lowered its target to $391 from $437 but maintained an Overweight rating. Stifel revised its target to $424 from $438, sustaining a Buy rating, and Evercore ISI cut its target to $440 from $495, keeping an Outperform rating. Analysts cited concerns about Lululemon’s future growth prospects and conservative guidance, with some noting potential challenges in accelerating revenue growth in the U.S. market. Despite these adjustments, Lululemon’s strong financial position and product innovations were highlighted as positive factors.
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