Lululemon Tops Q1 Earnings and Revenue Estimates; Target Price $396

The Vancouver-based retailer healthy lifestyle-inspired athletic retailer Lululemon reported better-than-expected earnings and revenue in the first quarter of the fiscal year 2021 and expects full-year net revenue and profit higher than the analysts’ expectations.

The apparel retailer’s net revenue jumped 88% year on year to $1.23 billion, beating the Wall Street consensus estimates of $1.13 billion. Excluding items, Lululemon’s earnings per share came in at $1.16, higher than the market expectations of $0.91 per share.

Lululemon forecasts net revenue in the range of $1.300 billion to $1.330 billion for the second quarter of 2021. Diluted earnings per share are expected to be in the range of $1.05 to $1.10 for the quarter and adjusted diluted earnings per share are expected to be in the range of $1.10 to $1.15.

For full-year 2021, Lululemon forecasts net revenue in the range of $5.825 billion to $5.905 billion. Diluted earnings per share are expected to be in the range of $6.52 to $6.65 for the year and adjusted diluted earnings per share are expected to be in the range of $6.73 to $6.86.

Lululemon shares fell 1.07% to $317.36 on Thursday. The stock slumped about 9% so far this year.

Analyst Comments

“1Q results up big against easy compares. Stores are open again, int’l up >100% and ecom up 50%. These are great trends and should continue. However, we believe the strength in results is baked into valuation at this point,” noted Randal J. Konik, equity analyst at Jefferies.

“Moreover, we continue to believe Mirror and ’22 footwear launch will be dilutive to the P&L which could present issues if the core apparel biz slows. As a result, we believe LULU shares will stay flat, and prefer to buy NKE and UAA shares.”

Lululemon Stock Price Forecast

Fifteen analysts who offered stock ratings for Lululemon in the last three months forecast the average price in 12 months of $396.67 with a high forecast of $465.00 and a low forecast of $330.00.

The average price target represents a 24.99% increase from the last price of $317.36. Of those 15 analysts, 12 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $278 with a high of $476 under a bull scenario and $138 under the worst-case scenario. The firm gave an “Equal-weight” rating on the athletic apparel company’s stock.

“Lululemon (LULU) delivered another quarter of revenue & EPS results above Street expectations, with some items accelerating from pre-COVID-19 levels. We view raised guidance as conservative, but suspect Street estimates only climb to the high end of the new EPS range. Leave 1Q21 positive; estimates under review,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. B. Riley slashed the target price to $370 from $374. Cowen raised the target price to $405 from $392. JP Morgan cut the target price to $80 from $90.

“Expanded eComm capabilities, improved supply chain, better inventory management, & product initiatives led to enviable ’18-’19 performance & a robust return to pre-COVID-19 performance levels in 2H20, making high-teens-low-20s % comps seem normal. Still, current valuation appears extreme & positive EPS revisions appear minimal, so we stay EW,” Morgan Stanley’s Greenberger added.

“Compelling LT & post-COVID-19 growth opportunity driven by three factors: 1) international expansion, 2) digital growth, & 3) product innovation. LULU dominates the NA athletic yoga apparel category due to its unique brand positioning & fashionable products, & its athleisure focus is further advantaged in a COVID-impacted world.”

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