Stocks of Lululemon Are Heading for Record Highs as Bullish Analysts Dismiss Soft Guidance

Lululemon Athletica Inc. experienced a 3.7% surge in its stock on Friday, positioning it on course for a new all-time high. Analysts, despite a soft guidance, expressed bullish sentiments towards the yoga gear maker, commending its resilience in a challenging macroeconomic environment.

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Although the company (LULU) posted profits for the third quarter that surpassed expectations and sales that aligned with consensus estimates, its guidance for the fourth quarter fell below expectations. However, analysts remained optimistic, with Oppenheimer maintaining its outperform rating and elevating the price target from $450 to $540.

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In a client note, analysts led by Brian Nagel emphasized Lululemon's position as an established yet evolving disruptor in athleisure and apparel. They highlighted the persistent growth potential and economic resilience exhibited by Lululemon in the third-quarter numbers. Looking ahead to 2024, the analysts expressed increased optimism regarding the company's fundamental prospects, particularly as macro pressures subside.

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J.P. Morgan also reiterated an overweight rating on Lululemon, raising the price target to $500 from $489. The third-quarter results translated to a 500 basis points gain in market share in the U.S., with a focus on ongoing innovation, new-store openings, and optimizations. Despite the below-consensus fourth-quarter guidance, the company reported its most successful Black Friday, with strength across both store and e-commerce channels.

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Truist analysts, maintaining a buy rating, increased their price target to $527 from $500, considering the guidance conservative. They highlighted Lululemon's strong international growth profile, loyal high-income customer base, and robust innovation pipeline as factors providing a cushion against macroeconomic factors.

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Analysts Joseph Civello and Scot Ciccarelli noted management's prudence in planning due to the uncertain macro environment. Truist sees meaningful upside potential following the record Black Friday, anticipating improved gross margins in the fourth quarter with moderated industry inventory headwinds.

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Wedbush adhered to its outperform rating, raising the price target to $503 from $420. Analyst Tom Nikic pointed out the solid 15% growth in men's, highlighting the company's plans to launch men's footwear in 2024. Despite men's cautious approach in a high inflation environment, strong overseas sales, driven by successful ad campaigns and partnerships, contributed to Lululemon's positive performance.

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The stock has exhibited a 50% gain year-to-date, outpacing the S&P 500, which gained 19%. Overall, analysts across various firms remain optimistic about Lululemon's growth trajectory, emphasizing its market position, innovation, and resilience in the face of economic challenges.