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On Friday, Truist Securities adjusted its outlook on Lululemon Athletica Inc. (NASDAQ:LULU) by reducing the price target to $380 from the previous $460, while maintaining a Buy rating on the company’s shares. The revision followed Lululemon’s announcement of its 2025 outlook, which did not meet expectations, leading to a roughly 10% drop in share value after market close. The stock, currently trading at $289.46, sits well below its 52-week high of $423.32. Despite a strong performance in the fourth quarter, the company’s guidance for both the first quarter and the full year of 2025 fell short of Wall Street forecasts. According to InvestingPro data, analyst targets for the stock range from $194 to $500, reflecting diverse market opinions about the company’s prospects.
The company’s recent report indicated that while customers showed a positive response to new product assortments, it wasn’t sufficient to counterbalance the macroeconomic pressures affecting customer traffic. Consequently, sales momentum in the U.S. has not seen an improvement from the fourth quarter levels. Despite these challenges, the company maintains impressive gross profit margins of 58.85% and has generated over $1.5 billion in free cash flow over the last twelve months. Truist Securities analyst Joseph Civello noted that there are opportunities for Lululemon to outperform its outlook throughout the year, particularly in terms of profitability, given the company’s historical performance.
Civello also pointed out that Lululemon’s valuation is currently near historical lows, which could provide a supportive base for the stock. This observation is supported by InvestingPro analysis, which shows the company trading at a PEG ratio of just 0.31, suggesting potential undervaluation relative to its growth prospects. Despite the lowered price target, Truist Securities suggests that the company’s stock still holds potential for growth and recommends maintaining a Buy rating. InvestingPro’s comprehensive analysis reveals 8 additional key insights about LULU’s valuation and growth prospects, available in the full Pro Research Report.
Lululemon has been facing challenges in driving top-line growth due to the broader economic environment impacting consumer behavior. The company, however, remains optimistic about the reception of its newer product lines and is looking to leverage these to improve its performance going forward.
Investors and market watchers will be closely monitoring Lululemon’s progress through the year, as the company navigates the headwinds and aims to achieve the upside that Truist Securities anticipates. The new price target of $380 reflects both the challenges and the potential that analysts see in the athletic apparel retailer’s future.
In other recent news, Lululemon Athletica Inc. reported a 13% year-over-year revenue increase in its fourth quarter, with earnings per share (EPS) of $6.14. Despite these strong results, the company provided a conservative forecast for fiscal year 2025, anticipating revenues between $11,150 million and $11,300 million, which is below some analyst expectations. Piper Sandler and UBS both adjusted their price targets to $315 and $335, respectively, citing a muted growth outlook in the U.S. market. Meanwhile, KeyBanc reduced its price target to $400 but maintained an Overweight rating, expressing confidence in Lululemon’s strategic initiatives. Stifel also lowered its target to $424, keeping a Buy rating and highlighting the positive reception of new product lines like GlowUp and Daydrift. Needham cut its price target to $366, noting the company’s strong cash reserves but emphasizing the challenges in accelerating revenue growth. Analysts have expressed varying levels of optimism, with some highlighting the potential for international expansion and product innovation. These developments reflect a mixed outlook for Lululemon, with analysts weighing strong financial performance against cautious future guidance.
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