Lululemon Stock Draws Praise From Analysts After Q1 Results: 'Ample Runway For Growth'

Apparel company Lululemon Athletica Inc LULU reported first quarter financial results that beat Street consensus estimates for both revenue and earnings per share. Analysts are upgrading their price targets after the quarterly results.

The Lululemon Analysts: Wedbush analyst Tom Nikic had an Outperform rating and a price target of $415.

KeyBanc Capital Markets analyst Noah Zatzkin had an Overweight rating and raised the price target from $390 to $400.

Telsey Advisory Group analyst Dana Telsey had an Outperform rating and raised the price target from $425 to $430.

Bernstein analyst Aneesha Sherman had an Underperform rating and raised the price target from $320 to $328.

Related Link: Trading Strategies For Lululemon Stock After Q1 Earnings

The Analyst Takeaways: Wedbush's Nikic called the first quarter results “yet another strong quarter” from Lululemon.

“Within the strong 17% comp growth in Q1, performance was strong in both stores and e-commerce, with strong traffic growth of 30% in both channels,” Nikic said.

The analyst said results were strong across a diverse range of channels, genders and categories in the first quarter.

Nikic also said international growth was strong with the Greater China leading the way with 79% year-over-year growth.

“Looking ahead, they are poised to continue their global expansion, including an upcoming entry into Thailand, where they plan to open one of their 30-35 anticipated international stores by the end of the year.”

KeyBanc's Zatzkin said Lululemon continued to post strong results and beat estimates from analysts.

“The beat and raise supports our view that increasing brand awareness and product newness are enabling LULU to navigate what has been a challenging macro for most retailers,” Zatzkin said.

The analyst called Lululemon one of the top apparel ideas for the year with a “meaningful opportunity” over the long term.

“We continue to view innovation across product categories as a meaningful LT growth driver; notably, on the footwear front.”

The outlook for the full year was raised by Telsey after the company updated its guidance.

“Despite market fears of an industry-wide slowdown in the specialty retail/apparel space, the company delivered an impressive start to FY23, besting expectations across the board,” Telsey said.

The analyst said other apparel companies have reported strong first-quarter results, but have shared guidance below expectations given the macro environment.

“However, LULU’s 2Q23 guidance nicely brackets consensus on both the top and bottom lines, speaking to the overall strength of the business and the ability to navigate volatile market conditions near-term.”

Bernstein's Sherman maintains an Underperform rating on Lululemon while raising the price target on shares.

The analyst was concerned about margins for the company going forward and higher marketing spend to improve brand awareness.

LULU Price Action: Lululemon shares are up 12.57% to $369.64 on Friday versus a 52-week trading range of $258.79 to $389.06.

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Photo: Courtesy Lululemon