On Thursday, BofA Securities updated its stance on Lululemon Athletica Inc. (NASDAQ:LULU), increasing the price target to $440 from the previous $430 while sustaining a Buy rating on the stock. The revision reflects optimism about the company's growth prospects, particularly in the second half of the year.
Lululemon reported a first-quarter earnings per share (EPS) of $2.54, surpassing the $2.30 estimate, primarily driven by robust sales growth. The international sales saw a significant increase of 40% on a constant currency basis, while U.S. sales grew by 2%. The company also benefited from a higher gross margin and interest income.
The management of Lululemon has reaffirmed its fiscal year 2024 guidance, projecting sales growth between 11-12% and a slight operating margin expansion of 10 basis points. Additionally, the EPS guidance has been raised by $0.27, now ranging from $14.27 to $14.47, factoring in share repurchases and higher interest income.
In light of these developments, BofA Securities has adjusted its fiscal year 2024 EPS estimate for Lululemon, raising it by $0.70 to $14.27. The new price objective of $440 is based on a 17x multiple of the fiscal year 2025 enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization) estimate. The analyst highlighted the company's improving innovation pipeline as a key driver for the anticipated acceleration in sales trends, especially with the expected enhancement in product newness and availability within the women's segment.
In other recent news, Lululemon Athletica Inc. has been the focus of several analyst adjustments. Morgan Stanley lowered its price target for Lululemon to $404 but maintained an Overweight rating, citing potential for a U.S. sales surge and near-term positive EPS revisions. On the other hand, BTIG reiterated its Buy rating with a price target of $425, expressing confidence in the company's fundamentals and future prospects.
TD Cowen also reaffirmed its Buy rating on Lululemon but reduced the price target to $437, citing the company's strong financial returns despite increased competition. Meanwhile, Citi adjusted its price target on Lululemon shares to $415 while maintaining a Buy rating, anticipating modest growth in the Americas for fiscal year 2024.
InvestingPro Insights
Following BofA Securities' optimistic outlook on Lululemon Athletica Inc. (NASDAQ:LULU), InvestingPro data and tips provide additional context for potential investors. The company currently holds a market capitalization of $38.82 billion and has shown impressive revenue growth of 18.6% in the last twelve months as of Q4 2024. This aligns with the positive sales trends highlighted by BofA analysts.
InvestingPro Tips suggest that Lululemon maintains a strong balance sheet, holding more cash than debt, and liquid assets exceed its short-term obligations, indicating a robust financial position. Moreover, the company is trading at a low P/E ratio relative to near-term earnings growth, with a P/E ratio of 24.96 and a PEG ratio of 0.3, suggesting the stock may be undervalued given its growth prospects. This is particularly relevant considering the company's stock is trading near its 52-week low, which could represent a buying opportunity for those who believe in the company's long-term potential.
Additionally, while Lululemon does not pay a dividend, the company has been profitable over the last twelve months and analysts predict profitability will continue this year. For investors seeking further insights, InvestingPro offers additional tips that can be accessed with an exclusive 10% discount on a yearly or biyearly Pro and Pro+ subscription using the coupon code PRONEWS24. In total, there are 11 additional InvestingPro Tips available for Lululemon, providing a comprehensive understanding of the company's financial health and stock performance.
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