July 21, 2024

On Friday, Bernstein SocGen Group adjusted its outlook on Lululemon Athletica Inc. (NASDAQ: NASDAQ:), raising the price target to $382 from the previous $376 while maintaining a Market Perform rating on the stock.

The change comes in response to Lululemon’s first-quarter performance, which, despite a slowdown in the U.S. business, surpassed expectations. The company also increased its full-year guidance, attributing the positive results to effective central cost management, interest, and share buybacks.

Management at Lululemon expressed confidence in addressing the assortment issues within their product lineup, indicating that it would take approximately two more quarters to implement the necessary changes. Still, concerns linger regarding the decline in the U.S. segment of the business and unresolved questions about the growth strategy’s size and composition.

In the statement released, the analyst noted that while the first-quarter results beat the forecasts and the full-year guidance was raised, the ongoing decline in the U.S. market could not be overlooked. The company’s management has acknowledged the need for improvements in their product assortment and is working towards that goal, but the timeframe for these adjustments is expected to span the next two quarters.

Lululemon’s stock performance and future outlook remain under close observation, with the firm adopting a neutral stance. This is reflective of the current uncertainties in the U.S. market performance and the anticipated time required to address the assortment issues that have been identified by the company’s management. The raised stock price target indicates a measured optimism in the company’s ability to manage costs and navigate through the challenges it faces.

In other recent news, Lululemon Athletica Inc. reported first-quarter earnings per share (EPS) of $2.54, surpassing expectations, driven by robust sales growth. International sales were up 40% and U.S. sales up 2%. The company also expanded its share repurchase program by an additional $1 billion, leaving $1.7 billion remaining in the buyback authorization.

Various financial analysts have made adjustments in response to these results. Citi maintains a buy on Lululemon with a price target steady at $415. KeyBanc revised its price target for Lululemon, reducing it to $415 from $515, while maintaining an Overweight rating.

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. These are recent developments in the financial performance of Lululemon Athletica Inc.

InvestingPro Insights

As Lululemon Athletica Inc. (NASDAQ: LULU) navigates through its current challenges, several metrics from InvestingPro provide a deeper dive into the company’s financial health and market performance. Notably, Lululemon holds more cash than debt on its balance sheet, a sign of financial stability that may reassure investors. Moreover, the company’s liquid assets exceed its short-term obligations, further underscoring its ability to meet immediate financial responsibilities.

From a valuation perspective, Lululemon is trading at a P/E ratio of 25.91 and a slightly lower adjusted P/E ratio of 24.99 based on the last twelve months as of Q1 2025. The company’s PEG ratio during the same period stands at an attractive 0.32, suggesting that its share price may be undervalued relative to its earnings growth. Still, the stock has experienced significant price declines over the past three to six months, with a 29.36% drop over the last quarter and a 30.48% fall over the past six months.

For those interested in exploring further, there are additional InvestingPro Tips available that can provide more nuanced insights into Lululemon’s financials and market prospects. By visiting the dedicated page on InvestingPro, readers can access these exclusive tips and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 20 analysts revising their earnings downwards for the upcoming period, these tips could be particularly valuable for investors looking to make informed decisions about the stock.

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