Anna Andreeva, Piper Sandler, says that Lululemon Athletica Inc. (NASDAQ: LULU), is unlikely to command a higher multi-fold until it can increase its US sales.
The athletic apparel retailer exceeded expectations, but its domestic business was a laggard during its third financial quarter.
“Historically, the US comp. has been the main driver of LULU’s multiple. The company reported flat US Sales. Andreeva told CNBC today that the company’s US sales were flat.
Lululemon’s shares are still up about 10% after the Q3 earnings announcement last night.
Lululemon’s operating margins could be affected
Piper Sandler, an analyst at Piper Sandler, was not impressed by the increase in sales of Lululemon during Black Friday.
This is because the shopping day for the entire industry was strong – it was not just Lululemon.
LULU released its earnings last night and one of the green areas was its operating margin, which is now at a high of around 22%.
Anna Andreeva, however, took that statement with a grain of salt. The company is investing aggressively in its marketing efforts which could impact the company’s margins by 2025.
It’s not as if Lululemon pays a dividend to income investors in writing, either.
LULU is expensive to own at the current levels
Lululemon’s stock is currently selling for around 26 times its projected earnings.
The analyst at Piper Sandler is more interested in the recent gains of the stock.
Anna Andreeva says that LULU traded for less than 20 times in August, and this makes it expensive to write until it turns green when compared with US comps.
Her “neutral rating” on Lululemon’s shares is accompanied by a $340 target price, which suggests that they could lose all of their post-earnings gains in the coming week.
Lululemon faces intense competition
Anna Andreeva, Piper Sandler, agreed on “Worldwide Exchange” that Lululemon was a fantastic brand.
She added that the rising cost of customer acquisition could be increased by Alo and Vuori in the next year.
Lululemon forecasts $3.495 billion for the holiday quarter – just a little below the $3.50 billion analysts had predicted. The company’s forecast for earnings per share at $5.60 was marginally higher than the experts’ estimates of $4.59 billion.
“While we are feeling good about the holiday, we still have a large volume of weeks ahead of us. We continue to plan for the quarter four period with care, given the shorter holiday season,” Calvin McDonald, the chief executive officer of Lululemon, said in a release issued last night.
Lululemon has announced its earnings more than a week after signing a major deal with the NHL.
This post Lululemon Stock is unlikely to find its Mojo Again in 2025 may be updated as updates unfold
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