Dana Telsey says that investors should buy Lululemon Athletica Inc. (NASDAQ:LULU) after the earnings decline. Telsey Advisory Group is her company.
In an interview today, she stated that although LULU missed expectations last night with its future guidance, the numbers themselves were not as bad the market perceives them to be.
Lululemon’s stock is down almost 30% from its high for the year.
Customers are responding to LULU’s new products
Lululemon exceeded expectations on both the top and bottom line in its Q4 fiscal.
The retailer’s gross profit margin was also better than expected for the recently completed quarter.
Telsey is still positive about LULU, as it saw some improvement in its fourth quarter in the US and the momentum should continue in 2025.
The company’s management told its investors that, while traffic has been down, as it has been for the rest of the industry since the beginning of this year, the customers are still responding positively. This gives them confidence in the future of Lululemon.
Plus, the Canadian giant aggressively repurchases stock to create even more value for its investors.
It repurchased about $1.6 billion of its stock during Q4 and authorized another $1 billion last night.
Lululemon is able to weather the new tariff environment
Dana Telsey believes that Lululemon is a good investment, not only because it is one of the least vulnerable retailers to tariff increases under the Trump Administration.
The multinational also has plenty of room to grow elsewhere, even if the US slows down.
Brand awareness in large economies such as France, Germany and Japan is currently in the low single digits. LULU has said that it is committed to improving this with marketing and ambassador relations.
Lululemon Athletica is also gaining in importance on the Chinese market.
Together, these countries can help the retailer achieve significant growth.
LULU shares could rise to $445 by 2025
Telsey thinks it is smart that Lululemon has set a target of up to 7.0% in sales growth for 2025, as “other companies would need to accelerate to meet their guidance.”
She expects that the retailer’s robust strategy for innovation and its strong pipeline will help LULU share prices recover through the rest of 2025.
She’s convinced that new product lines such as Daydrift Glow Up and BeCalm could see Lululemon claw its stock back to $445, which indicates a potential upside of almost 50% from current levels.
Dana Telsey’s bullishness on athletic apparel retailer is not unique.
Lululemon Athletica is also rated “overweight” by the consensus, with an average gain of $381.
This post Market overreacts Lululemon Q4 earnings: What you need to Know may be modified as new information becomes available
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