On Tuesday, TD Cowen exhibited continued confidence in Lululemon Athletica Inc. (NASDAQ: NASDAQ:LULU), adjusting the company's price target to $383 from the previous $382 while sustaining a Buy rating on the stock.
The adjustment follows a mixed review of Lululemon's third-quarter performance in the Americas, which showed signs of both improvement and increased promotional activity, likely factored into the company's guidance. According to InvestingPro data, LULU maintains impressive gross profit margins of 58.5% and has demonstrated solid revenue growth of 13% over the last twelve months.
The analyst from TD Cowen revised their estimates slightly downward, taking into account a steady year-over-year performance in the Americas and a robust 30% year-over-year growth in international markets. The new price target reflects a valuation of 25 times the forecasted fiscal year 2025 earnings per share (EPS) and 15 times the enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA).
InvestingPro analysis indicates the company maintains a "GREAT" financial health score, with strong metrics across profitability and cash flow measures.
The firm's perspective hinges on the expectation that if Lululemon's management can reaffirm its full-year guidance and demonstrate an uptick in sales trends within the Americas, the company's valuation could see a rise following the third-quarter earnings report. The price target suggests a modest but precise increase, indicating a nuanced and measured outlook from the analyst.
The updated price target and maintained Buy rating are based on the current financial metrics and market performance of Lululemon. These reflect the analyst's calculations and projections for the company's upcoming fiscal periods, considering both the recent past and expected future performance.
Investors and market watchers will be looking to Lululemon's upcoming earnings report, scheduled for December 5, to gauge whether the company meets or exceeds the expectations set forth, which could influence the stock's movement and validate TD Cowen's analysis. For deeper insights into LULU's valuation and additional ProTips, including its strong balance sheet position and growth metrics, check out the comprehensive research available on InvestingPro.
In other recent news, Lululemon Athletica Inc. reported a 7% rise in second-quarter total revenue, reaching $2.4 billion, and earnings per share (EPS) of $3.15, surpassing the expected $2.94. However, the fiscal year 2024 sales growth forecast was revised from 11-12% to 8-9%. Analyst firms such as Morgan Stanley (NYSE:MS), Baird, and Truist Securities have responded positively to these developments, maintaining their positive ratings and adjusting their price targets to reflect current trends.
Piper Sandler kept its Neutral rating on Lululemon, with a consistent price target of $260.00, indicating the company's impressive financial health, supported by robust revenue growth of 13% over the last twelve months. Meanwhile, Citi maintained a Neutral rating, projecting a third-quarter earnings per share (EPS) beat, anticipating $2.79 versus a consensus of $2.68, driven by a modest comparable sales increase.
The company has also seen a significant rise in its shares, increasing by 37% from the low reached in early August, with the stock currently trading at a forward 2025 earnings per share (EPS) multiple of 23.5x. Additionally, Lululemon is expected to see fewer competitive pressures as competitor Alo shifts its focus away from the Athleisure/Yoga market.
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