Analysts Lift Lululemon Price Target Following Strong Q3 Beat

Several analysts raised the price target of Lululemon Athletica Inc LULU following its reported third-quarter (Q3) earnings beat and announced a $1 billion buyback.

Yesterday, the Vancouver-based company reported a revenue increase of 19% Y/Y to $2.2 billion, which beat the consensus estimate of $2.19 billion and quarterly adjusted earnings of $2.53 per share, which beat analyst estimates of $2.28 per share.

LULU sees fourth-quarter revenue in the range of $3.135 billion to $3.17 billion, versus estimates of $3.18 billion. The company anticipates full-year 2023 revenue of $9.549 billion to $9.584 billion. Full year earnings are expected to be between $12.34 and $12.42 per share. The board also authorized an additional $1 billion buyback.

• Needham analyst Anna Andreeva raised the price target to $525 from $470 and maintained the Buy rating.
• Telsey Advisory Group analyst Dana Telsey increased the price target to $520 from $450 and reiterated an Outperform rating.
• Goldman Sachs analyst Brooke Roach increased the price target to $513 from $464 at a Buy rating.
• Morgan Stanley analyst Alex Straton lifted the price target to $493 from $437 and maintained an Overweight rating.
• Apart from this, at an Overweight rating, Barclays upped the price target to $530 from $480, JPMorgan to $500 from $489, and Keybanc to $500 from $450.
• UBS boosted the price target to $470 from $429 and kept the Neutral rating, and Bernstein lifted it to $400 from $366 while reaffirming a Market Perform rating.

Needham: Andreeva increased revenue and EPS estimates to $9.581 billion (from $9.569 billion) and $12.42 (from $12.06) for FY23 and $10.943 billion (from $10.938 billion) and $14.02 (from $13.90) for FY24.

Also, Andreeva sees FCF to more than triple this year (over $1B) and share buyback (new $1B share buyback).

Sales growth expectations hover at around 14%, with bigger outerwear investment appearing to be working and easy gross margin comparables.

Telsey: Telsey remains encouraged that LULU continues to deliver strong results while investing in future growth opportunities, and expects continued momentum in the business despite a challenging and uncertain operating environment.

The analyst raised the EPS outlook to $12.42 from $12.15 for FY23 and $14.25 from $14.00 for FY24.

The analyst increased the EPS estimates to $12.44 (from $12.20) for FY23, $14.50 (from $14.35) for FY24, and $17.26 (from $17.09) for FY25 to reflect the flow-through of stronger Q3 results and continued top and bottom line momentum in the business.

Morgan Stanley: Straton expects FY23 topline growth & operating margin above the company's guidance (+19% Y/Y & 23.4%), with EPS projected to be $12.69 EPS, above the company's outlook. 

Also, the analyst estimates Q4 EPS ~5% higher than the high end of guidance at $5.19, led by a slightly higher sales forecast & margin upside (+16% Y/Y & 29.2%).

Price Action: LULU shares are up 5.30% at $489.75 on the last check Friday.