On Thursday, Telsey Advisory Group adjusted its outlook on Lululemon Athletica Inc. (NASDAQ:LULU), reducing the price target to $470 from the previous $550 while sustaining an Outperform rating on the stock. The decision follows Lululemon's first-quarter performance which surpassed expectations, with sales, gross margin, and expense deleverage all reported better than the consensus.
The company experienced a slower start to the year in its US women's segment, as anticipated, but management is actively taking measures to improve inventory availability in smaller sizes and to enhance the color range in its core products, particularly leggings. Despite these initial challenges, Lululemon's men's and international businesses continue to perform robustly.
Lululemon has kept its full-year 2024 sales and operating margin forecasts unchanged. The brand anticipates a stronger inventory position in the US women's category moving forward. Additionally, product innovation is expected to be a key driver in the latter half of the year, potentially boosting top-line growth.
The firm believes that the quarter's results may alleviate concerns about domestic trends, which did not deteriorate as much as some feared.
With improved inventory management, product innovation, and a broader core assortment, Telsey anticipates better outcomes throughout the year that could support earnings growth and valuation expansion. The new price target of $470 is based on a 28.2x multiple on the firm's two-year forward earnings per share estimate, which aligns with the stock's one-year near-term average multiple.
In other recent news, Lululemon Athletica Inc. has been the focus of several analyst adjustments. TD Cowen raised the company's price target to $447, citing strong international performance and a raised fiscal year earnings per share (EPS) guidance by Lululemon's management.
BofA Securities also increased the price target to $440, reflecting optimism about the company's growth prospects. Meanwhile, Morgan Stanley reduced its price target to $404 but maintained an Overweight rating, suggesting potential for a U.S. sales surge and near-term positive EPS revisions.
BTIG reiterated its Buy rating with a price target of $425, expressing confidence in the company's fundamentals and prospects. Lululemon reported first-quarter earnings per share (EPS) of $2.54, exceeding the $2.30 estimate, driven by robust sales growth. International sales increased by 40% on a constant currency basis and U.S. sales grew by 2%. These are some of the recent developments for Lululemon Athletica Inc.
InvestingPro Insights
In light of the recent performance of Lululemon Athletica Inc. (NASDAQ:LULU), it's valuable to consider additional metrics and insights that could influence an investor's perspective. According to InvestingPro data, Lululemon holds a market capitalization of $38.82 billion, with a Price/Earnings (P/E) ratio of 24.96, reflecting investor sentiment about the company's earnings potential. Notably, the company's revenue has grown by a significant 18.6% over the last twelve months as of Q4 2024, showcasing its strong sales performance.
Two InvestingPro Tips that stand out include the company's robust liquidity position, with liquid assets surpassing short-term obligations, and the fact that Lululemon is trading at a low P/E ratio relative to near-term earnings growth, suggesting that the stock may be undervalued given its growth prospects. These insights, particularly when juxtaposed with the company's impressive revenue growth and the fact that analysts predict Lululemon will be profitable this year, provide a nuanced view of the stock's potential.
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