Analysts provided their views on Lululemon Athletica Inc. (NASDAQ:LULU) ahead of the Shanghai Analyst Meeting scheduled for October 9-10.

JP Morgan analyst Matthew R. Boss notes that North American revenues have outperformed Lululemon’s (Overweight with a price target of $338.00) April 2022 Investor Day plan, exceeding the expected low-double-digit CAGR by around 10 points, with FY23 achieving a 20% CAGR.

As a result, revenues in North America may now be “normalizing” toward the originally outlined low-double-digit CAGR for 2021-2026, with the analyst projecting a return to a 12% CAGR in the second half of FY24.

Boss expects Lululemon’s international revenues to grow by over 30% annually in FY24 and into FY25/26, resulting in a 35% revenue CAGR by 2026 compared to 2021, exceeding management’s 30%+ target.

This growth, driven by both China and other global markets, is expected to increase international revenues to 35% of total sales by 2026, adds the analyst.

The analyst projects FY24 EPS at $14.06 (vs. Street’s $13.99) within management’s guidance range of $13.95-$14.15, driven by +8.8% revenue growth (vs. Street’s +8.5%).

For FY25, Boss forecast EPS at $15.00 (vs. Street’s $14.94), with revenue growth of +5.8% and operating margins flat year-over-year, below management’s expected margin expansion.

Meanwhile, Goldman Sachs analyst Brooke Roach writes that recent data points for Lululemon (Neutral rated with a price target of $291) show a mixed outlook.

On the positive side, brand purchase intent and net promoter scores are improving according to HundredX, with stronger digital traffic and app downloads, along with a slight reduction in promotions year-over-year.

However, this is tempered by weak in-store traffic trends (down 9% YoY in September), declining Google search interest in the U.S. and Canada, and sluggish sales (according to Bloomberg), adds the analyst.

Roach says that while product newness has stabilized, this is attributed to easier year-over-year comparisons rather than a surge in new product launches.

The analyst anticipates the analyst meeting to highlight the brand’s international growth potential, with a focus on expansion in China. However, the analyst doesn’t expect any new long-term targets or financial guidance for the overall company to be announced.

Investors can gain exposure to the stock via Pacer US Cash Cows Growth ETF (NYSE:BUL) and Vanguard U.S. Quality Factor ETF (BATS:VFQY).

Price Action: LULU shares are down 0.41% at $269.28 at the last check Monday.

Image: Pedro Alvarez from Pixabay

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