On Friday, TD Cowen maintained a positive outlook on Lululemon Athletica Inc. (NASDAQ:LULU), raising the stock's price target to $382 from $375, while keeping a Buy rating. The adjustment follows the company's recent financial performance, which revealed a second-quarter sales shortfall but an earnings per share (EPS) boost, attributed to a strong gross margin. This resulted in a 13% year-over-year increase in EBIT dollars.
The analyst from TD Cowen highlighted that despite a tempered guidance for the second half of the year, Lululemon's financial model has shown resilience amidst a slowdown in the U.S. market. The company's performance is still surpassing the goals previously established for its U.S. business in 2022.
The raised price target to $382 is based on a 25 times multiple of the company's estimated EPS for the fiscal year 2025. This valuation reflects confidence in Lululemon's earnings potential and the strength of its financial model.
The analyst's commentary also mentioned the inclusion of findings from proprietary focus groups, which seem to support the firm's positive stance on Lululemon's stock. The specifics of these findings were not disclosed but are implied to underline the rationale behind the maintained Buy rating and increased price target.
In other recent news, Lululemon Athletica Inc. reported mixed financial results, with revenues falling short of expectations, but gross margin performance exceeding forecasts. Despite a reduction in its full-year earnings per share (EPS) outlook, the company's third-quarter revenue projections were below expectations for the fourth consecutive quarter.
Analyst firms BMO Capital and Piper Sandler maintained their Market Perform and Neutral ratings respectively, with Piper Sandler raising its price target to $260 from $250.
Lululemon's recent second-quarter results for 2024 showed a 7% increase in total revenue, reaching $2.4 billion, largely driven by a 29% increase in the international segment, particularly a 34% surge in China. The company's full-year revenue guidance is set between $10.375 billion and $10.475 billion, with diluted earnings per share projected to be between $13.95 and $14.15.
Among other developments, Lululemon plans to open 35 to 40 new stores in 2024, expanding its global presence. However, the company anticipates a decrease in gross margin and operating margin for the full year 2024.
InvestingPro Insights
Adding to the positive outlook from TD Cowen, InvestingPro data highlights key financial metrics that may be of interest to investors considering Lululemon Athletica Inc. (NASDAQ:LULU). The company boasts a strong market capitalization of $32.38 billion, reflecting its substantial presence in the market. Interestingly, Lululemon is trading at a P/E ratio of 20.75, which is relatively low compared to its near-term earnings growth, suggesting potential value for investors. Furthermore, the company's revenue growth over the last twelve months is an impressive 15.65%, indicating a robust financial performance.
From the perspective of liquidity, Lululemon holds more cash than debt on its balance sheet, which is a reassuring sign of financial stability. Moreover, the company's liquid assets exceed short-term obligations, providing further confidence in its ability to meet financial commitments. These InvestingPro Tips align with the raised price target by TD Cowen, as they reflect a company with solid fundamentals and a promising outlook.
For investors seeking additional insights, there are numerous other InvestingPro Tips available, including analysis on earnings revisions, stock price movements, and profitability metrics. For instance, while 12 analysts have revised their earnings downwards for the upcoming period, Lululemon is still expected to be profitable this year and has been profitable over the last twelve months. Additionally, the stock has experienced a significant decline over the last six months, which may present a buying opportunity for those who believe in the company's long-term value proposition.
For a more comprehensive analysis, investors can explore the full suite of InvestingPro Tips for Lululemon at https://www.investing.com/pro/LULU.
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