Lululemon, a company specializing in athletic and casual apparel, experienced a 34% decline in its stock price this year, currently trading at around $336 per share. Despite this, the company had a strong performance in FY 2023, with a 19% increase in revenue and a significant improvement in gross and operating margins. However, the stock price has been affected by lower-than-expected guidance for Q1 2024, with a softer U.S. market and increased spending impacting the outlook. Despite this, the management is still confident in double-digit growth for the full year and a rebound in profitability over the next few quarters.
The company’s P/E ratio has fluctuated over the past few years, with current levels at around 28x, 30% lower than the levels of FY 2023. Lululemon stock is trading at a discount compared to historical averages, but similar to competitors like Nike. The company’s operating margins are unmatched by its competitors, and there is a lot of potential for growth in categories like men’s apparel and international markets, which are currently underpenetrated.
Lululemon stock has underperformed the S&P 500 over the past few years, with returns of 12% in 2021, -18% in 2022, and 60% in 2023. In comparison, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 24% in 2023. Given the current uncertain macroeconomic environment, there is speculation on whether Lululemon will continue to underperform or see a strong jump in the next 12 months.
Forecasted revenues for Lululemon in FY 2024 are $10.8 billion, with an expected EPS of $14.09. Based on these forecasts, the company’s valuation has been revised to $432 per share, representing a 29% increase from the current market price. Comparisons with peers in the industry show how Lululemon stacks up against others in terms of key metrics, providing valuable insights for investors looking to make informed decisions.
Investors are advised to consider the potential growth prospects and valuation of Lululemon compared to its peers before making investment decisions. By analyzing key metrics and industry comparisons, investors can gain a better understanding of the company’s positioning in the market and make more informed choices.
