Lululemon Athletica's US Sales Recover, Trends Could Accelerate This Quarter, Says Bullish Analyst

While shares of Lululemon Athletica Inc LULU underperformed the broader index in 2024 due to a slowdown in U.S. sales, checks indicate "a strong recovery of demand" during the holiday season, according to Needham.

The Lululemon Athletica Analyst: Analyst Tom Nikic upgraded the rating for Lululemon Athletica from Hold to Buy, while establishing a price target of $475.

The Lululemon Athletica Thesis: The demand recovery in December suggests that the company's performance in the U.S. could accelerate in the current quarter, Nikic said in the upgrade note.

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"Our visits to stores uncovered strong traffic, long lines to pay, and lean inventory levels," he added.

Lululemon Athletica guided to sales growth of just 3%-4% for the fourth quarter, representing a significant slowdown from the high single-digit growth in the previous three quarters, which "allows for upside to numbers," the analyst stated.

The company "meaningfully" outperform its guidance for gross and EBIT margins, he further said.

"Furthermore, even with some recent improvement in the share price, the stock is still trading below recent valuation levels, presenting an opportunity for multiple expansion if the U.S. does re-accelerate," Nikic wrote.

LULU Price Action: Shares of Lululemon Athletica rose by 0.19% to $393.65 at publication Friday.

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