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Lululemon Athletica Inc.’s stock is up 16.5% premarket on Wednesday after the company reported better-than-expected fourth-quarter results and strong full-year revenue guidance late Tuesday.
Analysts see plenty of growth opportunities ahead for Lululemon, which makes yoga pants and other athletic apparel.
KeyBanc Capital Markets raised its Lululemon price target to $390 from $375 Tuesday, citing the company’s results and guidance. “Brand strength and product newness, coupled with a broader shift toward the casualization of apparel, are enabling LULU to navigate a challenging environment better than most peers,” wrote KeyBanc Capital Markets analyst Noah Zatzkin, in a note.
Lululemon remains one of KeyBanc Capital Markets’ key ideas for 2023 and long term, according to Zatzkin. “We see meaningful opportunity via product innovation/ launches and international growth,” he added.
KeyBanc Capital Markets has an overweight price target for Lululemon.
Related: Lululemon’s stock soars 13% on revenue, earnings beat
Last year Lululemon announced a five-year plan to double revenue to $12.5 billion by 2026. The strategy includes plans to double men’s and digital revenues and to quadruple international revenues.
During the fourth quarter Lululemon’s international net revenue grew 35% compared with the prior year’s quarter.
Wedbush also raised its Lululemon price target Wednesday, to $415 from $380. “With inventories and gross margin moving in the right direction, we believe the biggest overhang to the stock has been alleviated,” wrote Wedbush analyst Tom Nikic, in a note released Wednesday.
During the fourth quarter Lululemon’s gross margin decreased 300 basis points to 55.1% compared with the prior year’s period. The company’s inventories at the end of 2022 increased by 50% to $1.4 billion, compared to $966.5 million at the end of 2021. However, this included a $62.9 million provision against inventory related to lululemon Studio, which reduced its inventory growth rate by seven percentage points.
Internationally, Lululemon’s brand awareness is growing but there is plenty of potential to grow the business, according to Nikic. “They continue to have significant room to grow awareness and drive international growth, with China being a key opportunity,” he added.
See Now: Lululemon keeps driving customers to its stores despite tough economy, research says
Wedbush has an outperform rating for Lululemon.
Stifel also raised its Lululemon price target, to $460 from $450. “Bearish discourse around slowing growth and promotional risk to margin has been silenced, and we expect focus returns to global growth opportunities,” wrote Stifel analyst Jim Duffy, in a note released Tuesday. “We reaffirm our conviction in LULU as a core growth holding and continue to view shares undervalued.”
Stifel has a buy rating for Lululemon.
Lululemon’s stock has fallen 0.02% in 2023, compared with the S&P 500 index’s
SPX,
gain of 3.4%.
Of 33 analysts surveyed by FactSet, 21 have an overweight or buy rating, eight have a hold rating, and four have an underweight or sell rating.
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