Lululemon’s Q3 Earnings to Rise over 20%, Stock Is Well Worth Watching

The Vancouver-based healthy lifestyle-inspired athletic retailer Lululemon Athletica is expected to report its fiscal third-quarter earnings of $1.40 per share, which represents year-over-year growth of over 20% from $1.16 per share seen in the same period a year ago.

The apparel retailer would post year-over-year sales growth of about 28% to $1.43 billion. In the last two years, the company has beaten earnings per share (EPS) estimates most of the time.

Sales are expected to be $1.4-$1.43 billion in the third quarter of fiscal 2021, representing a two-year CAGR of 24-25%. The gross margin is expected to increase 50-100bps compared to the second quarter of fiscal 2019. The company expects adjusted earnings to be between $1.33 and $1.38 per share, compared with $1.16 in the prior-year quarter and 96 cents in the third quarter of fiscal 2019, according to ZACKS Research.

Net revenues are expected to reach $6.19-$6.26 billion for fiscal 2021 compared with $5.83-$5.91 billion earlier. Earnings per share will be $7.38-$7.48 versus $6.73-$6.86 previously mentioned.

Lululemon’s shares closed 1.3% lower at $448.43 on Wednesday. The stock surged nearly 30% so far this year.

Lululemon Stock Price Forecast

Seventeen analysts who offered stock ratings for Lululemon in the last three months forecast the average price in 12 months of $484.41 with a high forecast of $570.00 and a low forecast of $410.00.

The average price target represents an 8.02% change from the last price of $448.43. From those 17 analysts, 14 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $310 with a high of $528 under a bull scenario and $230 under the worst-case scenario. The firm gave an “Equal-weight” rating on the athletic apparel company’s stock.

Several other analysts have also updated their stock outlook. B. Riley raised the target price to $548 from $466. Deutsche Bank lifted the target price to $486 from $474. BMO upped the target price to $344 from $275.

Technical analysis suggests it is good to buy as 100-day Moving Average, and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst Comments

“Lululemon Athletica (LULU) is a long-term topline grower, supported by compelling secular tailwinds (e.g., performance/athleisure focus), a market share gain opportunity, & credible future revenue driver (e.g., international expansion, digital growth, & product innovation/expansion into new categories). The company’s recent MIRROR acquisition offers both revenue & profitability upside, as reflected in our bull case,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

“LULU dominates the NA athletic yoga apparel category due to its unique brand positioning & fashionable products. Covid accelerated consumers health & wellness focus & fashion casualization, both of which should benefit LULU.”