On Friday, Stifel analysts reiterated their Buy rating on Lululemon Athletica Inc. (NASDAQ:LULU) with a maintained price target of $438, as the stock currently trades at $373.13. The firm's positive outlook aligns with broader market sentiment, with InvestingPro data showing 24 analysts recently revising their earnings expectations upward. The firm's positive outlook is based on the anticipated rebound of the U.S. women's business, which accounts for a significant portion of the company's revenue and profits.
The U.S. women's segment, representing about 40% of Lululemon's 2024 revenue, is considered central to the company's economic model. The company has demonstrated strong revenue growth of 10.84% over the last twelve months, reaching $10.18 billion. According to Stifel, early product launches in the first quarter of the fiscal year, such as BeCalm, Glow-up, and Daydrift, have been well-received, indicating a positive shift following previous merchandising challenges in 2024.
Stifel's analysis suggests that a turnaround in the U.S. women's business could counteract negative perceptions and support a case for sustained double-digit revenue growth. The firm highlights Lululemon's exceptional return on invested capital of 33%, along with impressive gross margins of 58.85%, as key factors in their valuation.
The analyst's confidence is further bolstered by projections for the fiscal year 2025 that surpass the consensus. Stifel's endorsement of Lululemon's stock comes with the belief that the shares are currently undervalued, a view supported by InvestingPro's Fair Value analysis. The company maintains a "GREAT" financial health score, and investors can access detailed valuation metrics and 12 additional ProTips through the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Lululemon Athletica has been the focus of several analyst reports. Erste Group initiated coverage on the company with a Buy rating, highlighting the company's strong sales growth, operating margin, and return on equity. They also noted a recent increase in the company's earnings per share forecast. Bernstein analysts, on the other hand, maintained their Outperform rating with a $460 target, citing expected growth in the Americas and China. They also increased their FY24 earnings per share estimate following Lululemon's recent guidance raise.
TD Cowen reiterated its Buy rating on Lululemon with a $445 target, suggesting a significant opportunity for the company going into fiscal year 2025. Lululemon recently updated its Q4 sales guidance to a range of $3.56 billion to $3.58 billion, indicating an 11% to 12% year-over-year increase. The company also expects a better-than-expected gross margin expansion for the fourth quarter.
Evercore ISI analysts increased their price target for Lululemon to $440 from $425, following the company's announcement that it raised its fourth-quarter guidance based on strong holiday sales performance. Bernstein analysts also reiterated their Outperform rating and a price target of $460 following Lululemon's upward revision in its Q4 guidance. These are recent developments that investors will be keen to follow.
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