On Monday, a Citi analyst maintained a Neutral rating on shares of Lululemon Athletica Inc. (NASDAQ: NASDAQ:LULU), with a consistent price target of $270.00. According to InvestingPro data, the company maintains a "GREAT" financial health score, with the stock currently trading below its Fair Value.
The analyst projects a third-quarter earnings per share (EPS) beat, anticipating $2.79 versus a consensus of $2.68, driven by a modest comparable sales increase of +3.3% compared to the expected +2.6%, attributed to stronger international sales.
The analyst expects the third-quarter performance in the Americas to reflect a -2% comparable sales figure, indicating no significant change in trends from the second quarter due to ongoing weak category trends impacting demand. The management's strategy of not increasing promotions to drive sales leads to expectations of gross margins aligning with consensus. Currently, Lululemon maintains impressive gross profit margins of 58.5%, while delivering strong revenue growth of 13% over the last twelve months.
The forecast includes a prediction that management will adjust the full year 2024 guidance upwards by approximately $0.05 at the midpoint following the third-quarter beat, setting fourth-quarter guidance roughly in line with consensus expectations.
The analyst suggests that while tighter expense control and robust international sales may limit the downside to full year 2024 EPS, weaker U.S. trends could continue into full year 2025, posing challenges for Lululemon's earnings growth.
The stock has seen a significant rise, increasing by 37% from the low reached in early August. It is currently trading at a forward 2025 earnings per share (EPS) multiple of 23.5x. According to the analyst, this valuation suggests a slightly unfavorable risk/reward scenario for the investors. With earnings just three days away, InvestingPro subscribers can access 8 additional key insights and a comprehensive Pro Research Report to make more informed investment decisions.
In other recent news, Lululemon Athletica Inc. has been the subject of multiple analyst notes. The company reported a 7% rise in second-quarter total revenue, hitting $2.4 billion, and earnings per share (EPS) of $3.15, exceeding the expected $2.94. However, the fiscal year 2024 sales growth forecast was revised from 11-12% to 8-9%.
Oppenheimer maintained its Outperform rating but reduced the price target to $380, citing current trends within the company and the broader athleisure sector. Morgan Stanley (NYSE:MS) also maintained an Overweight rating and increased the price target to $345, expecting a modest third-quarter earnings beat. Needham initiated coverage with a Hold rating due to multiple challenges the company is currently facing.
Baird raised its price target to $380 while maintaining an Outperform rating, reflecting a cautiously optimistic stance despite some headwinds. Truist Securities maintained a Buy rating and increased the stock's price target to $360, reflecting a positive outlook on the company's performance.
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