By Michael Elkins
Oppenheimer reiterated an Outperform rating on Lululemon Athletica Inc (NASDAQ:LULU) and raised the price target on the stock to $400.00 (from $393.00) after reviewing recent trends and finding that the athletic apparel company’s shift to a more digital distribution focus is working together with improved product innovation to drive outsized sales and margin expansion.
Analysts wrote in a note, “Market sentiment toward LULU has soured lately, as investors have fretted increasingly over prospects for stepped up inventory clearance, against a potentially worsening demand backdrop. We reviewed carefully recent trends at LULU and revisited our stance on shares. In our view, underlying, structural expansion prospects for LULU remain solidly intact, and any cyclically-driven margin and/or sales pressures, at the company, are likely to prove short-lived. At current levels, LULU shares are now tracking about consistent with historical trough valuations, making for a compelling entry point, particularly for intermediate - to longer-term focused clients.”
Oppenheimer’s 2023 EPS forecast goes to $9.36 from $9.66 and compares with a current Street figure of $11.36. In 2024 and 2025, they now look for earnings of $11.18 and $13.26, down from prior forecasts of $12.02 and $14.08, vs. current consensus estimates of $13.40 and $15.66.
Oppenheimer’s updated, below-Street EPS forecasts for LULU heed current, downbeat market sentiment, reflecting, conservatively, both prospects for a recessionary demand environment in 2023 and more aggressive inventory clearance activities, at the company, nearer term, followed by a subsequent recovery in sales and margin trends, albeit off more muted bases.
Shares of LULU are down 1.69% in morning trading on Wednesday.