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Is lululemon athletica (LULU) overbought?

7:26 am ET, 30 Aug 2018

lululemon athletica inc. (LULU) shares are trading at 138.88.  The company is expected to report its earnings on August 30 after the market close.  What's driving LULU stock price? What's LULU stock price forecast?

lululemon has been performing extremely well, generating an astounding 20% same-store sales increase in the first quarter.  The company made a good choice in the new CEO Calvin McDonald. 

Athleisure remains hot in the US, and international growth is on a tear.  With only 70 stores outside the US and Canada, there is a long way ahead for lululemon's geographic expansion in international markets.  Expansion of the men's line should also drive additional square footage growth.

However, the active apparel market is flooding with competition from established players such as Gap. The competitors have large cash reserves and rapid product development capabilities, along with a well-developed international distribution network.

What is the sentiment towards the LULU stock? Our technical analysis shows that:

  • The stock short-term sentiment (next 30 days) is trending positive;
  • The mid-term sentiment (3-6 months) is trending positive;
  • The long-term sentiment (9-12 months) is trending positive. 

Over the last month, lululemon athletica inc. (LULU) returned +12.83%.

lululemon athletica inc. (LULU) forward P/E ratio is 34.62, and it’s high compared to its industry peers’ P/E ratios.

lululemon athletica inc. (LULU) short share of float is 5.16%. The stock is much more frequently shorted than the average industry, sector or S&P 500 stock.

lululemon athletica inc. (LULU) average analyst price target ($95.79) is -30.97% below its current price ($138.76).

For the latest price and information on lululemon athletica inc., please visit Finstead and search for "LULU price" or "LULU news".

Lululemon Growth At The Expense Of Store Sales?

2:57 pm ET, 08 Dec 2017

retail lululemon LULU

Third-quarter comparable sales growth of 8% and 110 basis point adjusted gross margin expansion (to 52.2%) demonstrated Lululemon’s continued market share gains and pricing power

New store openings and comparable sales growth will moderate long term as the athletic apparel market becomes more saturated and the athleisure trend fades. Analysts expect 9% average annual top-line growth over the next five years and operating margins exceeding 20% by 2021 (versus 2016’s 18%). Assuming such growth levels, current shares may be overvalued.

The main opportunities ahead are in menswear, international, and e-commerce (DTC segment). Male guest transactions grew 21% in the quarter, bolstering our view that menswear can account for about 23% of sales by 2021, up from 18% last year. 

International sales strength was largely thanks to Asia, with market growth of about 100% in the quarter.

DTC sales grew more than 25% for the second straight quarter. 

While this runs ahead of the mid-teens growth we forecast for the year, it overshadows tepid same-store-sales (up 1% constant currency in the third quarter).  Further acceleration may likely come at the expense of store sales rather than producing incremental revenue. 

The channel shift to e-commerce may accelerate, but we don’t view even higher DTC sales altering our view of the company, as we think they would further cannibalize store sales.

Over the last year, LULU has returned +20.77%. This return is higher than Consumer Goods Sector (6.29%), Textile - Apparel Clothing Industry (0.79%), and S&P 500 (17.65%) return.

Analysts believe LULU shares are currently overvalued (visit Finbot and type "LULU price target").

lululemon athletica inc. (LULU) Stock Guide

Updated at: 6:30 pm ET, 12 Nov 2020

Before we start: if you're looking for LULU stock price, you can quickly find it out by visiting Finny and typing "LULU quote". If you're looking for a quick scoop on LULU stock (chart, price target, market cap, news and buy or sell analysis), go to Finny and look for "LULU". You'll get all this info in one place. Or you can just type "LULU news" to get the latest stock news.

Looking to buy or sell lululemon athletica inc. (LULU)? Interested in getting the full scoop on LULU, including earnings and dividends, stock forecast, buy or sell analysis and key stats? If so, you came to the right place.

In this LULU stock guide, we'll address key questions about LULU, above and beyond what you can find on Yahoo Finance, Zacks, MarketWatch or Morningstar.

Here is what you'll be able to find in this guide:

Earnings and Dividends: earnings, earnings date, dividend rate and dividend yield;
Analyst Predictions: stock forecast and analyst ratings;
Analysis: Finny Score and buy or sell analysis;
Key Stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio, industry, sector, and number of employees.

And here is the list of questions we'll answer:
1. What are LULU earnings?
2. When is LULU earnings date?
3. What is LULU stock forecast (i.e., prediction)?
4. LULU buy or sell? What is LULU Finny Score?
5. What are the reasons to buy LULU? Why should I buy LULU stock?
6. What are the reasons to sell LULU? Why should I sell LULU stock?
7. What are LULU key stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

So let's start. Scroll down to the question that interests you the most.

Earnings and Dividends

1. What are LULU earnings?

LULU trailing 12-month earnings per share (EPS) is $4.12.

2. When is LULU earnings date?

LULU earnings date is December 09, 2020.

Analyst Predictions

3. What is LULU stock forecast (i.e., prediction)?

Based on LULU analyst price targets, LULU stock forecast is $376.10 (for a year from now). That means the average analyst price target for LULU stock is $376.10. The prediction is based on 35 analyst estimates.

The low price target for LULU is $228.00, while the high price target is $450.00.

LULU analyst rating is Buy.


4. LULU buy or sell? What is LULU Finny Score?

#{finnyScore:50}Our quantitative analysis shows 5 reasons to buy and 5 reasons to sell LULU, resulting in Finny Score of 50.

5. What are the reasons to buy LULU? Why should I buy LULU stock?

Here are the reasons to buy LULU stock:

  • Lululemon’s unique grassroots marketing, use of ambassadors, mobile app, and community-based interactive stores create a loyal customer base.
  • With only about 400 stores at the end of fiscal 2016 and high brand recognition, there is a long runway for geographic expansion in international markets. Additional square footage growth can be driven through expansion of the men's line.
  • The company should realize some margin benefit from supply-chain investments, and the company competes in the fast-growing, high-margin activewear segment fueled by the athleisure fashion trend.
  • Lululemon emerged strong this holiday season driven by accelerating trends across all parts of its businesses. Further, the company anticipates business strength and current trends to sustain throughout 2018 and beyond. This led it to raise revenue and earnings forecasts for fourth-quarter fiscal 2017.
  • Lululemon is well on track with its strategy for 2020, by which the company aims to double its revenues to about $4 billion and more than double its earnings. To achieve these targets, management had outlined four distinct growth strategies, including product innovation, building store fleet in North America, expanding digital business and international expansion. With more customers turning to online portals, the company expects this channel to account for over one-third of its sales by 2020.
  • Lululemon is strongly focused on enhancing the e-commerce retailing channel and investing in the innovation of new product categories and bringing improvements to its website. Driven by its efforts to deliver an enhanced digital experience, DTC comps surged 26% (an increase of 25% in constant dollars) in third-quarter fiscal 2017.
  • Lululemon is on track with the remodeling of its iviva business into an online brand, as announced in June 2017. Incidentally, Lululemon had announced plans to develop iviva, its activewear brand, into an e-commerce focused business, with only eight iviva stores operating across North America. The company revealed plans to close about 40 of the total 55 iviva stores and convert nearly half of the remaining stores into lululemon branded stores.
  • LULU quarterly revenue growth was 2.20%, higher than the industry and sector average revenue growth (0.23% and 0.35%, respectively). See LULU revenue growth chart.
  • LULU PEG ratio (P/E adjusted for growth) is 4.64, which is low compared to its industry peers’ PEG ratios. See LULU PEG chart.
  • LULU average analyst rating is Buy. See LULU analyst rating chart.
  • LULU average analyst price target ($376.10) is above its current price ($329.91). See LULU price target chart.
  • LULU cash to debt ratio is 0.67, higher than the average industry (0.16) and sector (0.13) cash to debt ratio. See LULU cash to debt chart.

6. What are the reasons to sell LULU? Why should I sell LULU stock?

Let's look at the reasons to sell LULU stock (i.e., the bear case):

  • The active-apparel market is flooding with competition, much of which has large cash reserves and a strong supply chain for quick R&D, product development, and geographic expansion.
  • Although Lululemon comps are now positive again, they have not reached historic levels, which we think reflects more competition.
  • Economies of scale and pricing power appear to be more difficult to achieve. We think it is unlikely operating margin can return to the mid-20s range.
  • Considering Price-to-Earnings (P/E) ratio, Lululemon looks pretty overvalued when compared with the broader industry and the S&P 500. The stock has a trailing 12-month P/E of 35.7x, compared with 21.6x for the industry and 20.8x for the S&P 500. The company’s trailing 12-month P/E ratio is higher than the median level of 28.3x, and is pegged lower than the high level of 36.3x, scaled in the past year.
  • Lululemon is an elite and premium activewear brand which had established itself as a market leader in the yoga apparel segment. However, the company is facing stiff competition from leading brands like Gap, Nike, Nordstrom, L Brands and Under Armour, as well as other private and boutique brands to capture market share in the female yoga, running, dancing and stylish casual compression pant product lines. Apart from this, is also extending activewear offerings, thus intensifying the competition.
  • Lululemon does not manufacture raw materials or the final products by itself and therefore, depends on suppliers and third-party manufacturers for all its merchandise. Further, the company does not have any long-term deals with these outside sources and thus, relies on the availability of these products. It also competes with other companies for fabrics, production, raw materials and import quota capacity.
  • The apparel retail industry is consumer-driven and hence, very sensitive to the health of the economy. Spending on apparel and accessories is heavily dependent on the personal disposable income of consumers. Macroeconomic challenges such as high household debt and unemployment levels may restrain consumer spending on these items.
  • LULU profitability is declining. The YoY profit margin change was -3.18 percentage points. See LULU profitability chart.
  • LULU forward P/E ratio is 49.81, which is high compared to its industry peers’ P/E ratios. See LULU forward P/E ratio chart.
  • LULU Price/Book ratio is 20.79, which is high compared to its industry peers’ P/B ratios. See LULU forward Price/Book ratio chart.
  • LULU Price/Sales ratio is 10.76, which is high compared to its industry peers’ P/S ratios. See LULU forward Price/Sales ratio chart.
  • LULU Enterprise Value/Revenue multiple is 10.82, which is high compared to its industry peers’ Enterprise Value/Revenue multiples. See LULU Enterprise Value/Revenue chart.

Key Stats

7. What are LULU key stats : revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

Let's look at the key statistics for LULU:

Metrics LULU
Price $377.37
Average Price Target / Upside $376.10 / -0.34%
Average Analyst Rating Buy
Forward Dividend Yield 0.00%
Industry Apparel Stores
Sector Consumer Cyclical
Number of Employees 13,400
Market Cap $42.41B
Forward P/E Ratio 50.77
Price/Book Ratio 10.96
Revenue (TTM) $3.87B
YoY Quarterly Revenue Growth 2.20%
Profit Margin 13.94%

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