Lululemon Athletica Inc. experienced a 3.7% rise in stock on Friday, reaching a new all-time high. Analysts, though acknowledging soft guidance for the third quarter, expressed bullish sentiments and highlighted the company’s resilience in a challenging macro environment.
Unwavering Confidence
Leading the pack, Oppenheimer reiterated their outperform rating and increased their price target for Lululemon to $540 from $450. Their analysts, including Brian Nagel, emphasized the company’s status as an established and growing disruptor in athleisure and apparel overall. They praised Lululemon’s omni-channel capabilities and merchandising leadership.
Strong Growth Potential
The impressive third-quarter numbers further showcased Lululemon’s underlying growth potential and economic resiliency. Looking ahead to 2024, analysts expressed even greater optimism for the company’s near-term prospects. As macro pressures ease, they anticipate investors recognizing and rewarding Lululemon’s superior fundamental prowess with a higher valuation.
J.P. Morgan’s Support
Echoing this sentiment, analysts at J.P. Morgan maintained an overweight rating on the stock and raised their price target to $500 from $489. They highlighted Lululemon’s market share gains in the U.S., particularly in men’s and women’s segments, along with the company’s focus on ongoing innovation and customer acquisition strategies.
Black Friday Success
While Lululemon’s fourth-quarter guidance falls below consensus, the company reported its most successful Black Friday to date. With strong sales across physical stores and e-commerce channels, Lululemon witnessed balanced demand for both full-price and markdown merchandise.
Lululemon continues to be a top pick for Oppenheimer, further solidifying analysts’ confidence in its prospects.
Also read: DSW parent DBI’s stock plummets due to shrinking demand for footwear.
Truist Analysis: Lululemon’s Strong Potential and Conservative Guidance
Truist analysts, highly optimistic about Lululemon’s future, have raised their price target for the company’s stock. They believe that despite the uncertain macro environment, Lululemon’s momentum, robust innovation pipeline, and loyal customer base will help the company succeed.
Cushioning from Macroeconomic Factors
Joseph Civello and Scot Ciccarelli, the analysts from Truist, recognize that Lululemon is being cautious in its planning. They acknowledge that only 1/3rd of the quarter has passed in an unpredictable macro environment. However, they remain confident that Lululemon’s strong international growth profile and customer base will protect it from any unfavorable macro factors.
Upside Potential After Record Black Friday
Truist sees significant upside potential for Lululemon following its record-breaking performance on Black Friday. While the overall industry has faced inventory headwinds, Truist believes these headwinds have lessened compared to the previous year. As a result, they expect fewer markdowns, which could positively impact gross margins in the fourth quarter.
Wedbush’s Positive Outlook
Wedbush maintains its outperform rating on Lululemon’s stock and has increased its price target as well. Analyst Tom Nikic highlights the company’s solid 15% growth in men’s products, although it falls slightly behind the 19% growth in women’s products. He also notes that Lululemon is seeing strong demand for its accessories business and successful overseas sales.
Looking Towards the Future
Lululemon is planning to venture into the men’s footwear market in 2024. Additionally, the company’s accessories business has experienced robust double-digit growth in the third quarter. These positive indicators further affirm Lululemon’s potential for continued success.
Impressive Stock Performance
Lululemon’s stock has outperformed the market this year with a 50% increase, while the S&P 500 has gained 19%. This strong performance reflects the company’s ability to adapt and thrive in the retail industry.
Overall, Truist and Wedbush remain bullish on Lululemon, emphasizing its conservative guidance, loyal customer base, and potential for growth and innovation.
