In the realm of Wall Street, Lululemon’s (LULU) stock has long been the apple of investors’ eyes, praised for its stellar growth as a premier athletic apparel retailer with a devoted following.
Nonetheless, the tides have turned, with LULU witnessing a steep -46% drop year to date, ignited by a conservative fiscal 2024 guidance. While the expected net revenue growth of 10%-11% is commendable, it failed to meet the soaring expectations of many analysts.
As the anticipation builds for Lululemon’s Q1 earnings, set to be unveiled after-market on Wednesday, June 5, the burning question lingers – is it time to hold onto LULU or strike a deal as per the approaching quarterly results?
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Anticipation for Q1 Performance
Reflecting on the Price, Consensus & Surprise chart above, Lululemon has consistently outperformed earnings projections for 15 consecutive quarters. However, a lackluster outlook post its recent Q4 report sent shockwaves, causing LULU’s stock to nosedive.
Despite concerns over subdued consumer expenditure, the estimates suggest that Lululemon’s Q1 sales could touch $2.2B, marking a 10% jump from last year’s $2B. Additionally, Q1 earnings are anticipated to spike by 4% to $2.38 per share.
Reflection on Historical Performance & Valuation
While Lululemon strides forward with steady growth amidst heightened expectations, a flashback to its historical performance alongside a close scrutiny of its valuation stands paramount for potential investors at this juncture.
Looking back five years, LULU boasts a remarkable +75% rise, showcasing immense gains nearly touching +600% over the past decade. These figures outshine the Zacks Textile-Apparel Market’s -13%, surpass the S&P 500’s +181%, and even outpace the Nasdaq’s +289%.
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Of intrigue is the fact that Lululemon is currently trading at its lowest forward earnings multiple since its IPO in 2007 at 21.7X. This figure undeniably falls beneath its historical P/E zenith of 148.3X and embodies a 38% discount compared to the long-standing median of 35.5X.
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Key Takeaway
While the allure to invest in Lululemon at its current levels is enticing, with the apparel giant projecting a modest double-digit percentage growth on both revenue and earnings in FY24, caution is urged. LULU carries a Zacks Rank #4 (Sell), with EPS estimates for FY24 witnessing a gradual descent over the past quarter alongside a recent minor dip.
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lululemon athletica inc. (LULU) : Free Stock Analysis Report