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Susquehanna Raises Price Target for Lululemon Athletica

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Price movement of Lululemon

Lululemon Athletica (LULU) has a market cap of $7.9 billion. It rose by 2.0% to close at $57.09 per share as of January 21, 2016. The stock’s price movement on weekly, monthly, and year-to-date (or YTD) bases was 2.0%, 13.6%, and 8.8%, respectively, on the same day.

At times, the stock has broken the support of all moving day averages. Currently, LULU is trading 4.9% above its 20-day moving average, 11.7% above its 50-day moving average, and 2.4% below its 200-day moving average.

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What this has meant for VOT and SCHM

The Vanguard Mid-Cap Growth ETF (VOT) invests 0.38% of its holdings in Lululemon Athletica. VOT tracks a market-cap-weighted index of midcap growth companies selected by CRSP. The YTD price movement of VOT is -10.7% as of January 20, 2016.

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

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

  • Nike (NKE)—$103.1 billion
  • Gap (GPS)—$9.2 billion

Susquehanna raised price target

Susquehanna has raised the price target for Lululemon Athletica to $69 from $59 per share with the rise in performance.

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Lululemon raises fiscal 4Q15 guidance

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

  • Net revenues should in the range of $690–$695 million, which represents an approximate increase of 15%–19% on a constant dollar basis, compared to fiscal 4Q14.
  • Diluted EPS should be in the range of $0.78–$0.80, compared to the previous guidance in the range of $0.75–$0.78.

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

Performance of Lululemon in recent fiscal 3Q15

Lululemon Athletica (LULU) reported fiscal 3Q15 net revenues of $479.7 million, which represents a rise of 14.4% over its net revenues 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, compared to its net income and EPS of $60.5 million and $0.42, respectively, in fiscal 3Q14.

The price-to-earnings and price-to-book value ratios of Lululemon Athletica are 31.2x and 7.6x, respectively, as of January 21, 2016.

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