On Thursday, CFRA adjusted its stance on Lululemon Athletica Inc. (NASDAQ:LULU), reducing the 12-month price target from the previous $550.00 to $435.00, while still endorsing the stock with a Buy rating. The new price target reflects a valuation of 30.0 times the firm's fiscal year 2025 (ending January) earnings per share (EPS) estimate, which is under the company's five-year average forward price-to-earnings (P/E) multiple of 42.2 times.
The firm has kept its fiscal year 2025 EPS forecast for Lululemon at $14.50 and has introduced a fiscal year 2026 EPS estimate of $17.00. Lululemon reported a normalized first-quarter EPS of $2.54, surpassing the consensus estimate by $0.14, on revenues of $2.21 billion, which slightly exceeded expectations by $12 million.
The revenue increase was region-specific, with the Americas seeing a 3% year-over-year growth and international revenues climbing by an impressive 35%. The first quarter also saw an adjusted gross margin improvement of 20 basis points, reaching 57.7%. Following these results, Lululemon has uplifted its full-year EPS guidance to a range of $14.27 to $14.47.
Moreover, the company has expanded its share repurchase program by an additional $1 billion, leaving $1.7 billion remaining in the buyback authorization. Despite a slowdown in growth within the Americas, Lululemon is recognized as a leading entity in the apparel retail sector. The firm anticipates a resurgence in growth in the Americas and ongoing success in China, where revenue soared by 45% in the first quarter, and globally, with comparable sales in the international segment up by 25% year-over-year.
In other recent news, Lululemon Athletica Inc. reported first-quarter earnings per share (EPS) of $2.54, exceeding the $2.30 estimate, driven by robust sales growth. Wells Fargo has adjusted its outlook on Lululemon, reducing the stock target to $350 while maintaining an Equal Weight rating. The firm cited merchandising challenges and escalating industry competition as reasons for the adjustment. Telsey Advisory Group, on the other hand, cut Lululemon's price target to $470 but maintained an Outperform rating, highlighting the company's robust performance in the men's and international segments.
InvestingPro Insights
As Lululemon Athletica Inc. navigates a dynamic retail landscape, real-time metrics from InvestingPro provide a deeper financial context. With a market capitalization of $38.82 billion, Lululemon is trading at a P/E ratio of 24.96, which is attractive considering its near-term earnings growth potential. The company's robust financial health is underscored by a gross profit margin of 58.31% over the last twelve months as of Q1 2023, reflecting efficient operations and strong pricing power.
InvestingPro Tips highlight that Lululemon holds more cash than debt, indicating a solid balance sheet and financial flexibility. Additionally, the company's liquid assets surpass its short-term obligations, which is reassuring for investors concerned about near-term liquidity. These tips, along with 11 additional insights available on InvestingPro, can further inform investment decisions. For those interested in accessing these valuable tips, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
While some analysts have revised their earnings downwards for the upcoming period, Lululemon's price has also seen a significant drop over the last three months, currently trading near its 52-week low. This could represent a potential entry point for investors, especially given the company's historical high return over the last decade and predictions of profitability this year. The InvestingPro Fair Value estimate of $388.62 suggests that the stock may be undervalued at its previous close of $308.27, providing an interesting angle for investors to consider.
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