Lululemon Athletica Inc. (NASDAQ:LULU) shares are trading higher after the company reported better-than-expected third-quarter financial results and increased its share buyback program by $1 billion.
Throughout the third quarter, the company repurchased 1.6 million shares of its common stock for $408.5 million. Furthermore, it approved a $1.0 billion increase to its share repurchase program, bringing the total authorized repurchases to approximately $1.8 billion.
Lululemon issued guidance for the 2024 fourth quarter. It sees revenue from $3.475 billion to $3.510 billion versus analyst estimates of $3.496 billion.
Multiple analyst firms raised their respective price forecasts on the stock.
Here are the analysts’ takes on the earnings results:
- Stifel analyst Jim Duffy reiterated the Buy rating on Lululemon, raising the price forecast to $438 from $370.
- JP Morgan analyst Matthew R. Boss reiterated the Overweight rating on the stock, increasing the price forecast to $425 from $338.
- Goldman Sachs analyst Brooke Roach maintained a Neutral rating on the company and raised the price forecast to $365 from $291.
- KeyBanc Capital Markets analyst Ashley Owens reiterated the Overweight rating on the stock, boosting the price forecast to $400 from $350.
- Truist Securities analyst Joseph Civello reiterated the Buy rating on the stock, raising the price forecast to $420 from $360.
- Guggenheim analyst Robert Drbul maintained the Buy rating on Lululemon, raising the price forecast to $415 from $350.
- Oppenheimer analyst Brian Nagel reiterated the Outperform rating on Lululemon.
Stifel: Duffy sees Lululemon as well-positioned to benefit from ongoing trends, with international growth potentially underestimated.
The analyst writes that the company may continue its strong growth by attracting new customers and increasing revenue per customer.
In fact, Duffy forecasts several years of mid-teens revenue growth, margin expansion, and share repurchases, supported by the company’s capital-efficient business model.
The analyst raised FY24 EPS estimates from $14.00 to $14.17.
JP Morgan: The analyst notes that the company still has strong potential in the domestic market, with international expansion offering significant untapped opportunities.
Boss predicts
the brand could reach around $12 billion in revenue by FY26, compared to approximately $4 billion in FY19. This growth is expected to be driven by expanding international presence, strong growth in men’s products, entry into new categories like personal care and footwear, and continued growth in e-commerce.
Goldman Sachs: The analyst is encouraged by Lululemon’s sequential improvement in business and a strong start to the holiday season.
Roach notes that management is progressing in product innovation and rebalancing, which should help unlock stronger growth in the U.S. market.
The analyst is also positive about the company’s consistent international growth momentum and effective cost control.
KeyBanc Capital Markets: The analyst sees opportunities for innovation across product categories, colors, and prints, as well as in brand awareness, which remains low in the U.S. at 36%.
Owens also sees growth potential in men’s products, accessories, and international markets.
The analyst adds that in 2025, Lululemon plans to expand into new markets, including Italy (company-operated) and, Denmark, Belgium, Turkey, and the Czech Republic (under franchise models).
Truist Securities: The analyst notes that Lululemon’s new reporting structure, where Global Creative Director Jonathan Chung reports to CEO Calvin McDonald and Chief Merchant Liz Bender reports to Chief Brand Officer Nikki Neuburger, is streamlining the product development process. This has allowed the company to introduce new products more quickly, improving conversion rates.
Civello sees new product offerings to continue improving through the fourth quarter and reach historical levels by the first quarter of 2025.
Guggenheim: Drbul notes that Lululemon’s FY24 EPS estimate has been increased to $14.15, up from $14.05.
This adjustment reflects a promising start to the holiday season, but the analyst remains cautious due to macroeconomic uncertainties and the shorter holiday shopping period.
Oppenheimer: The analyst mentions that while they have taken a more cautious view on Lululemon in the short term, Nagel still considers the company and its shares well-positioned for the intermediate to long term.
Price Action: LULU shares are trading higher by 18.5% to $408.5 at last check Friday.
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