On Thursday, BTIG issued an update on Lululemon Athletica Inc. (NASDAQ:LULU), reducing the price target to $360 from the previous $425 while maintaining a Buy rating on the stock. The firm adjusted its second quarter earnings per share (EPS) estimate for Lululemon to $2.92, aligning with the lower end of the company's guidance range of $2.92-$2.97. This adjustment reflects anticipated additional sales and margin pressure as the quarter concludes.
The firm also revised its full-year 2024 EPS forecast for Lululemon to $14.02 from $14.46, which sits below the company's provided guidance of $14.27-$14.47. The new estimate is based on the expectation of a steady performance in the Americas during the second half of the year, rather than the slight acceleration previously anticipated. Additionally, the gross margin (GM) is now projected to decrease by 30 basis points year-over-year, contrary to the company's guidance of a flat GM, to accommodate further markdowns and product write-offs.
The updated price target of $360 represents a change in valuation multiples, with shares now expected to trade at 23 times price-to-earnings (P/E) and 14 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) based on the firm's 2025 estimates. This is a decrease from the former multiples of 26 times P/E and 16 times EV/EBITDA. BTIG has applied these lower multiples to reflect the increased uncertainty around Lululemon's execution risk.
InvestingPro Insights
In light of BTIG's recent update on Lululemon Athletica Inc. (NASDAQ:LULU), it's worth noting some key metrics and insights from InvestingPro that may provide additional context for investors. Lululemon's market capitalization stands at a robust $31.11 billion, reflecting its significant presence in the apparel industry. The company's P/E ratio, which is currently at 19.89, suggests that the stock is trading at a discount relative to near-term earnings growth, as highlighted by one of the InvestingPro Tips. This is supported by the adjusted P/E ratio for the last twelve months as of Q1 2025, which is slightly lower at 19.02.
Moreover, Lululemon's strong financial health is underscored by its cash position, with the company holding more cash than debt on its balance sheet—an aspect that investors may find reassuring. Additionally, the stock's RSI indicates it is in oversold territory, potentially signaling a buying opportunity for those looking at technical analysis. Another InvestingPro Tip points out that liquid assets exceed short-term obligations, further emphasizing the company's financial stability.
While 24 analysts have revised their earnings downwards for the upcoming period, it's important to note that Lululemon has been profitable over the last twelve months and analysts predict profitability for this year as well. For investors seeking more comprehensive analysis, there are additional InvestingPro Tips available, which can be accessed through the InvestingPro platform. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, offering a deeper dive into the potential of Lululemon's stock.
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