On Friday, Baird demonstrated confidence in Lululemon Athletica Inc. (NASDAQ: NASDAQ:LULU) shares by raising its price target on the company's stock to $480.00, up from the previous target of $440.00. The firm has maintained an Outperform rating for the athletic apparel retailer. This optimism aligns with broader analyst sentiment, as InvestingPro data shows 12 analysts have recently revised their earnings estimates upward for the upcoming period.
The adjustment in the price target is based on a valuation that applies a multiple of approximately 17 to 18 times the next twelve months plus one (NTM+1) EBITDA. This valuation range is chosen to reflect a balance between Lululemon's long-term growth prospects and current uncertainties around its near-term growth, particularly in the U.S. market.
According to InvestingPro analysis, LULU currently trades at an EV/EBITDA of 17.07x, with impressive gross profit margins of 58.85% and revenue growth of 10.84% in the last twelve months.
The new price target of $480.00 implies a forward earnings multiple of around 30 times the firm's estimates for NTM+1 EPS. This valuation represents a roughly 10% premium over Nike (NYSE:NKE), which is narrower than the historical average premium of about 20%. Additionally, it suggests a 30% premium over the S&P 500 index, which is significantly less than the long-term average premium of approximately 90%.
Baird's analysis indicates that Lululemon's stock is currently valued in line with Nike, deviating from the usual premium it has commanded. This change in premium is noteworthy given the historical context and the company's performance relative to its peers and the broader market.
Lululemon Athletica Inc., known for its high-end yoga pants and other athletic wear, has been a strong performer in the retail sector. The updated price target from Baird suggests a continued positive outlook for the company despite the current market challenges it faces.
In other recent news, Lululemon Athletica Inc. has seen several adjustments to its price target following a robust third-quarter earnings report showing a 9% revenue growth to $2.40 billion and earnings per share of $2.87.
Deutsche Bank (ETR:DBKGn) raised its price target to $396, while BMO Capital Markets, CFRA, and TD Cowen increased their targets to $302, $376, and $421, respectively. Piper Sandler also raised its target to $340, citing effective management of sales and gross margin.
These revisions follow Lululemon's strong performance, particularly in the Americas and International markets. The company's gross margin expanded by 39 basis points year-over-year, defying forecasted contraction. Lululemon's management anticipates further product margin benefits in the fourth quarter and slight improvements in markdowns.
Analysts project that product newness will return to historical levels by the first quarter of 2025. The financial institution foresees a path for Lululemon's earnings to grow at least in the high single digits by 2025. Lululemon's international business showed robust growth, with a 33% year-over-year increase, and a significant 39% surge in China.
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