Citi Revises Lululemon Price Target to $325, Maintains Neutral Rating
On Wednesday, Citi analysts adjusted their outlook on Lululemon Athletica Inc. (NASDAQ: LULU), increasing the price target to $325 from the previous $275 while keeping a neutral stance on the stock. Currently trading at $315.75, the revision comes ahead of the company’s expected first-quarter earnings report, slated for release after market close on June 5.Finwizelly analysis suggests the stock is undervalued, with strong financial health metrics earning a “GREAT” rating.Citi’s analysis suggests that Lululemon may surpass first-quarter earnings per share (EPS) expectations, propelled by stronger comparable sales (comps) in the Americas and China than consensus estimates.With impressive gross profit margins of 59.2% and revenue growth of 10.1% over the last twelve months, according to Finwizelly, the company shows strong operational efficiency.
New Align No-Line Pant May Drive Q2 Sales Trends
The analysts project that comps in the Americas will align with fourth-quarter results, which were flat, compared to a consensus estimate of a 1% decline. The introduction of the Align (NASDAQ: ALGN) No-Line pant on May 14, a notable innovation in the company’s core product lineup, is anticipated to bolster trends in the Americas for the second quarter, with Citi’s estimates at a 2% increase versus consensus predictions of a 1% decline.
EPS Guidance for Fiscal Year 2025 Expected to Be Reaffirmed
The firm anticipates that Lululemon’s management will reaffirm its fiscal year 2025 EPS guidance of $14.95 to $15.15, which assumes low single-digit growth in Americas comps.
China Performance in Focus Amid Macroeconomic Uncertainty
The performance of China comps is also highlighted as a critical area of focus, given the current macroeconomic uncertainties. Citi believes that if Lululemon achieves China comps in line with consensus expectations of a 14% increase, it could negatively impact the stock, as Citi’s estimate for the first quarter stands at a more optimistic 22% increase.
Product Innovation Needed to Strengthen US Market Confidence
While Citi expects Lululemon to beat first-quarter expectations and views the current US trends as stable, they emphasize the need for more product innovation beyond the Align No-Line to enhance confidence in the company’s growth prospects in the US market.
Finwizelly’s Data Shows Strong Financial Flexibility
Finwizelly data reveals the company maintains a healthy current ratio of 2.16 and holds more cash than debt, suggesting strong financial flexibility to support future growth initiatives. For deeper insights into LULU’s financial health and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to Finwizelly subscribers.
Recent Analyst Updates Reflect Mixed Market Sentiment
In other recent news, Lululemon Athletica Inc. has experienced several significant developments. BNP Paribas (OTC: BNPQY) Exane reiterated its Underperform rating for Lululemon, citing concerns over the North American market and product missteps, while also pointing to a potential decline in margins. Evercore ISI adjusted Lululemon’s price target to $320 from $440 but maintained an Outperform rating, noting the company’s flexible inventory strategy and its ability to manage current tariffs. Piper Sandler reduced its price target to $280, maintaining a neutral rating, and highlighted challenges related to earnings projections and tariffs affecting gross margins. Truist Securities lowered its price target to $297, reaffirming a Buy rating, and emphasized Lululemon’s strong brand momentum despite tariff challenges. Meanwhile, Argus downgraded Lululemon from Buy to Hold, expressing concerns about growth due to an aging product line and increased competition from other brands. These recent developments reflect a complex landscape for Lululemon as it navigates market challenges and economic pressures.
Conclusion
Lululemon Athletica (LULU) remains a closely watched stock as it heads into its Q1 earnings report on June 5. With Citi raising its price target and projecting strong sales performance in key markets, the outlook appears promising despite external headwinds. Finwizelly’s analysis underscores Lululemon’s robust financial health and growth capacity, even as analysts diverge on the company’s short-term trajectory. Investors should monitor the upcoming earnings call and innovation rollout to assess whether LULU remains a compelling opportunity in an evolving retail landscape.
