Lululemon Athletica's LULU acquisition of Mirror could add $2 in aggregate earning power over the next five years.
That's according to BTIG analyst Camilo Lyon, who reiterated a Buy rating on the stock and raised the price target from $345 to $355.
Lululemon Acquiring Mirror Thesis: Lululemon completed its acquisition of in-home fitness company Mirror with the transaction closing last Wednesday.
“Over the next five years, we estimate Mirror could add an aggregated $1.93 of present value EPS power to LULU,” according to the analyst.
“Under generally conservative assumptions, we estimate LULU can ramp up to a total Mirror user base of 390K subscribers over the next five years. Those users would in turn generate an estimated $342 million in total 2024 revenue (versus an estimated $100 million this year) comprising $173 million in equipment sales and, more importantly, $170 million in recurring subscription revenue,” Lyon wrote in a note.
The analyst framed model assumptions based on the Peloton.
Related Link: Wall Street Weighs In On Lululemon's Mirror Acquisition
Well Positioned Despite COVID-19 Impact: The analyst noted while it's expected COVID-19 will materially impact the retail industry, lululemon is well-positioned to weather the current crisis from both a liquidity perspective and a brand perspective.
“We believe LULU is among the few companies that entered the current environment from a position of strength and as such, will exit it stronger. In addition, we believe LULU is a beneficiary of consumers continuing to spend on at-home exercise / workout-related activities while quarantined in their homes,” Lyon said.
Lululemon's international expansion efforts, particularly in China, will also continue to enhance profitability and expand the brand's reach.
LULU Price Action: Lululemon shares traded around $305 on Tuesday. The stock has a 52-week high of $324.76 and a 52-week low of $128.84.
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