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Lululemon Raised Projections and Seres Made Deal with Nestle

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Price movement of Lululemon

Lululemon Athletica (LULU) rose by 3.8% to close at $56.82 per share as of January 12, 2016. The price movement on a weekly, monthly, and year-to-date (or YTD) basis is 2.2%, 23.7%, and 8.3%, respectively.

The stock has broken the support and is trading below all moving day averages. Currently, LULU is trading 8.9% above its 20-day moving average, 12.6% above its 50-day moving average, and 3.2% below its 200-day moving average.

The Vanguard Mid-Cap Growth ETF (VOT) invests 0.38% of its holdings in Lululemon Athletica. The ETF tracks a market-cap-weighted index of midcap growth companies selected by CRSP.

The Schwab US Mid-Cap ETF (SCHM) invests 0.28% of its holdings in Lululemon Athletica. The ETF tracks a market-cap-weighted index of mid-cap stocks in the Dow Jones US Total Stock Market Index.

The competitors of Lululemon Athletica (LULU) and their market caps are as follows:

  • Nike (NKE): $102.1 billion
  • The Gap (GPS): $9.2 billion
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Lululemon raises fiscal 4Q15 guidance

The company has made the following projections for fiscal 4Q15:

  • Net revenue to be in the range of $690 to $695 million, an increase of 15% and ~19% on a constant dollar basis as compared to fiscal 4Q14.
  • Diluted EPS to be in the range of $0.78 to $0.80 as compared to previous guidance of $0.75 to $0.78.

On January 4, 2016, Wells Fargo upgraded Lululemon Athletica to an “outperform” rating from “market perform.”

Performance of Lululemon in recent fiscal 3Q15

Lululemon Athletica (LULU) reported fiscal 3Q15 net revenue of $479.7 million, a rise of 14.4% when compared to net revenue of $419.4 million in fiscal 3Q14. Its net income and EPS (earnings per share) fell to $53.2 million and $0.38, respectively, in fiscal 3Q15 as compared to net income and EPS of $60.5 million and $0.42, respectively, in fiscal 3Q14.

The PE (price-to-earnings) and PBV (price-to-book value) ratios of Lululemon Athletica are 30.4x and 7.4x, respectively, as of January 15, 2016.

Seres Therapeutics to collaborate with Nestle

Seres Therapeutics (MCRB) has entered into an agreement with Nestle Health Science to develop and commercialize its products for Clostridium Difficile Infection (or CDI) and inflammatory bowel diseases (or IBD), including ulcerative colitis and Crohn’s diseases, outside of the United States and Canada. This agreement will help Seres’s product portfolio and ongoing research and development.

Under this agreement, Seres granted Nestle Health Science commercial rights in global markets outside of the United States and Canada to SER-109 and SER-262 for CDI and SER-287 and SER-301 for IBD. Nestle Health Science will provide an upfront payment of $120 million in cash and a series of contingent payments for development and sales milestones and tiered royalties on sales in the range of high single digits to high teens for all products.

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