On Wednesday, Morgan Stanley adjusted its outlook on Lululemon Athletica Inc. (NASDAQ:LULU), reducing the price target to $404 from the previous $490. Despite this change, the firm maintained its Overweight rating on the company's shares. The adjustment reflects a mix of expectations and caution regarding the athletic apparel retailer's near-term performance.
The firm's analysis suggests that Lululemon may experience an earnings per share (EPS) increase for the first quarter and could potentially raise its full-year EPS guidance. However, the analyst emphasized that a significant uptick in U.S. sales is necessary to counteract the current bearish sentiment. The Overweight rating is sustained by the anticipation of a possible U.S. sales surge, Lululemon's leading profitability, and the chance for positive near-term EPS revisions.
Morgan Stanley believes that these factors justify a higher forward price-to-earnings (P/E) multiple for Lululemon compared to its current levels. The firm's stance remains positive, as it continues to see value in the stock's future prospects. The new price target of $404 indicates a level of confidence in the company's ability to outperform, despite the lowered expectation from the previous target.
InvestingPro Insights
As Lululemon Athletica Inc. (NASDAQ:LULU) continues to navigate the competitive athletic wear landscape, real-time data and insights from InvestingPro provide a deeper look into the company's financial health and stock performance. With a market capitalization of $37.18 billion and a P/E ratio standing at 24.05, the company showcases robust financial fundamentals. Notably, Lululemon holds a PEG ratio of 0.3, indicating that the stock may be undervalued based on its earnings growth rate.
InvestingPro Tips suggest that Lululemon's stock is currently in oversold territory, as indicated by the RSI, and trades at a low P/E ratio relative to near-term earnings growth, potentially offering an attractive entry point for investors. Additionally, despite recent price declines, analysts predict profitability for the company this year, which could be a catalyst for future stock appreciation.
Investors can explore further insights and tips on Lululemon by visiting https://www.investing.com/pro/LULU, where they will find 12 additional InvestingPro Tips to inform their investment decisions. To enhance their InvestingPro experience, users can use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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