On Friday, TD Cowen exhibited confidence in Lululemon Athletica Inc. (NASDAQ: NASDAQ:LULU) shares, raising the price target on the company's shares to $421 from the previous $383. The firm maintained a Buy rating on the stock, signaling optimism about the athletic apparel company's future performance.
According to InvestingPro analysis, Lululemon's current market price suggests the stock may be undervalued, with strong financial health metrics supporting potential upside.
The upgrade is grounded in the company's solid holiday sales and management's assurance regarding gross margin as the fourth quarter progresses and looking into fiscal year 2025. Supporting this outlook, InvestingPro data shows Lululemon maintains impressive gross profit margins of 58.85% and holds more cash than debt on its balance sheet.
TD Cowen's analysis suggests that Lululemon is on track with its financial strategies, including a significant share repurchase program that is expected to be completed by FY25, underpinned by the company's free cash flow projection of $1.7 billion for the same period.
The firm's analysts are confident in Lululemon's revenue growth, especially in the United States, where comparable store sales are anticipated to see positive inflection in FY25. This optimism is further bolstered by the expectation of new product offerings returning to historical levels by the first quarter of FY25.
The growth forecast for FY25 includes a 6% increase in sales, with a 3% rise in the Americas and a robust 14% jump internationally. Discover more detailed insights and 12 additional key tips about LULU with an InvestingPro subscription, including exclusive Fair Value analysis and comprehensive financial health scores.
TD Cowen's earnings per share estimate for Lululemon in FY25 stands at $15.41, which is notably higher than the consensus estimate of $14.99. The analysis assumes that gross margin will remain approximately stable with minimal leverage in selling, general, and administrative expenses (SG&A).
The impact of the company's new merchandising and design team is expected to support comparable sales in Spring '25, with the firm predicting mid-single-digit growth in the Americas and high-teen growth internationally as sustainable trends beyond FY25.
In other recent news, Lululemon Athletica Inc. has experienced significant changes following their recent third-quarter earnings report. The company's earnings per share of $2.87 and 9% revenue growth to $2.40 billion surpassed expectations, leading to multiple price target revisions.
Piper Sandler, Guggenheim, KeyBanc Capital Markets, and Truist Securities have adjusted their price targets to $340, $415, $400, and $420, respectively. Stifel has set the highest target at $438, reflecting the firm's confidence in Lululemon's robust economic model and prospects for global expansion.
The company's international business showed robust growth, with a 33% year-over-year increase, and a notable 39% surge in China. Despite a consistent trend in the core U.S. market, the company's revised earnings per share (EPS) forecast has returned to levels seen at the beginning of the year.
The management team at Lululemon has expressed optimism regarding the potential of their new design team to introduce innovative products. However, the fiscal year 2024 sales growth forecast was revised from 11-12% to 8-9%.
These recent developments provide investors with an updated perspective on Lululemon's performance and potential. The company's robust economic model, which includes a return on invested capital of 32%, and its prospects for global expansion were reasons for the upgraded targets. Piper Sandler has revised its earnings estimates upward to $15.20 for the fiscal year 2025, anticipating that consensus estimates will align with this projection.
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