Lululemon Shares Are Getting Flexed, But Analysts Are Still Bullish

Lululemon Athletica inc. LULU delivered yet another impressive earnings report Thursday, but shares are getting pummeled.

The Canadian-based athletic apparel brand delivered third-quarter adjusted earnings of 75 cents per share, beating estimates by 5 cents. Sales came in at $748 million, $10.55 million higher than consensus. Comparable sales were up 17 percent and direct-to-consumer net revenues were up 46 percent.

Still, shares are down more than 11 percent Friday, but analysts continue to be bullish on the company’s future.

Taking A Breather

Shawn Cruz, Senior Trading Specialist at TD Ameritrade says lululemon’s performance is still impressive but expectations are getting quite high.

"The bigger thing is the performance year-to-date," he said. "The stock’s been on a bit of a tear, so when you look at where they’re at now, they're still up 50 percent on the year. So it wasn’t good enough to justify this continued move higher, but I don't think it’s as negative as what the street is making it look like. It's just taking a breather."

Remains A Top Growth Idea

Cowen analyst John Kernan says the company remains a top secular growth idea heading into 2019 and maintains an Outperform rating with a $185 price target.

“We think guidance for Q4 is conservative and that consensus SSS and gross margin estimates through FY20 could be conservative. Innovation across multiple categories continue to impress (new customer acquisition +41%),” Kernan said.

MKM Partners analyst Roxanne Meyer calls 2018 a rebirth year for lululemon and expects 2019 to build on momentum.

“We see upside potential to 4Q and multiple catalysts to drive earnings upside over the next several years,” said Meyer, who reiterated a Buy rating with a $177 price target.

Baird analyst Mark Altschwager trimmed his price target from $190 to $180 but maintained an Outperform rating.

“We trimmed our price target to reflect more conservative valuation assumptions but continue to see attractive risk/reward supported by brand momentum, product innovation, continued product margin expansion, significant whitespace opportunities, and upside to F2020 targets,” he said.

Loyalty Program Testing Well In Edmonton

JPMorgan analyst Matthew Boss maintained an Outperform rating with a $180 price target. The analyst highlighted that lululemon’s highly-anticipated loyalty program is now being tested in Edmonton.

He says the program is seeing strong initial reads, with members paying an annual fee of $128 to receive either a pant or pair of shorts designed exclusively for the program, in addition to access to sweat classes, attendance at curated events, personal development, and free expedited shipping for online orders.

The stock traded around $116.22 at time of publication, down 11.5 percent.

Related Links:

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