On Friday, Citi reaffirmed its positive stance on Lululemon Athletica Inc. (NASDAQ: NASDAQ:LULU), maintaining a Buy rating and a price target of $415.00. The endorsement comes after the company's first-quarter sales met consensus estimates and exceeded the more pessimistic market expectations. Despite concerns over increasing competition from smaller brands such as Alo and Vuori, Citi attributes recent underperformance in the United States market to product assortment issues rather than a decline in brand strength.
The analysis highlighted that first-quarter results demonstrated stable trends in the United States, evidenced by an uptick in traffic, and suggested that consumer demand remains robust. Management's confidence in the second half of the year's innovation pipeline was also noted as a positive sign.
While the competitive environment is expected to continue to spark debate about the stock in the near term, and improvement in the U.S. market may be necessary for significant expansion of the company's trading multiple, Citi sees limited downside to earnings per share (EPS).
Citi's outlook is supported by the company's disciplined approach to selling, general, and administrative expenses (SG&A). With Lululemon shares currently trading at a forward 2024 price-to-earnings (P/E) multiple of 22 times, Citi believes the risk/reward profile is appealing, especially considering Lululemon's significant international growth opportunities.
This perspective offers a counterpoint to the investor sentiment that had been dampened by concerns over rising competition impacting the stock ahead of the earnings announcement.
In other recent news, Lululemon Athletica Inc. has been the subject of various adjustments by financial analysts following its first-quarter earnings report. KeyBanc revised its price target for Lululemon, reducing it to $415 from $515, while maintaining an Overweight rating. The company's first-quarter earnings per share (EPS) of $2.54 surpassed expectations, driven by sales growth, with international sales up 40% and U.S. sales up 2%.
In response to the earnings report, BofA Securities raised its price target for Lululemon to $440, maintaining a Buy rating. However, BMO Capital cut its share price target to $384, while maintaining a Market Perform rating. BTIG maintained a Buy rating on Lululemon, reaffirming a $425 price target, citing potential growth in the second half of the year.
CFRA reduced its 12-month price target from $550.00 to $435.00, but maintained a Buy rating. Wells Fargo reduced its price target to $350, maintaining an Equal Weight rating, citing merchandising challenges and escalating industry competition. TD Cowen raised Lululemon's price target to $447, highlighting the company's strong international performance and raised fiscal year EPS guidance.
These recent developments come after Lululemon reported region-specific revenue increases, with the Americas seeing a 3% year-over-year growth and international revenues climbing by an impressive 35%. The company also expanded its share repurchase program by an additional $1 billion, leaving $1.7 billion remaining in the buyback authorization.
InvestingPro Insights
In light of Citi's reaffirmed Buy rating on Lululemon Athletica Inc. (NASDAQ: LULU), InvestingPro provides valuable insights that align with the positive outlook. With a robust Market Cap of $40.38 billion and a P/E Ratio of 24.73, Lululemon demonstrates financial stability and reasonable valuation relative to near-term earnings growth. Notably, the company's Gross Profit Margin for the last twelve months as of Q1 2025 stands at an impressive 58.34%, reinforcing the quality of its earnings.
Two key InvestingPro Tips offer additional perspectives for investors considering Lululemon's stock. Firstly, the company holds more cash than debt on its balance sheet, indicating a strong financial position. Secondly, despite a significant price drop over the last three months, analysts predict the company will be profitable this year, which could suggest potential for a rebound.
For investors looking to delve deeper into Lululemon's performance and future prospects, InvestingPro offers many more tips. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to a comprehensive set of tools and insights to inform their investment decisions.
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