A look at the latest analyst actions
Lululemon Athletica’s (LULU) 1Q17 results were followed by mixed reactions from Wall Street. While Susquehanna, Bank of America Merrill Lynch, and D.A. Davidson raised their price targets, FBR reduced its price target.
Most of the analysts were critical of the company’s rising expenses. “Investors have been awaiting a moderation of expense growth for some time now, but that does not appear to be occurring,” said Wells Fargo analysts in a note. The company’s SG&A[1. selling, general, and administrative] expenses rate increased to 38.3% compared to 36.6% in 1Q16.
The note added, “Bigger picture, even if spending slows, top-line growth appears to be slower as well, and concerns persist about the underinvested e-commerce business.” Wells Fargo rates Lululemon a “market perform” and has set a target price of $54 on the stock.
Broader view of Wall Street on LULU
While there were target price revisions for Lululemon after its results, there were no recommendation changes.
The company, which is rated by 35 Wall Street analysts, retained its 2.5 rating on a scale of 1 (strong buy) to 5 (sell). In comparison, Nike (NKE) and Columbia Sportswear (COLM) have better ratings at 2.2 each. Under Armour (UAA), however, has received the lowest rating of 2.8 among the sportswear peers.
Of the analysts who cover LULU, 49% recommended holding the stock. Wells Fargo, Susquehanna, D.A. Davidson, and UBS are among the brokers who have “hold” recommendations.
Plus, 43% analysts recommend buying the stock. This compares to 61% “buy” ratings for Nike and 43% for Columbia Sportswear.
LULU is currently trading at $54.29, ~51% below its 52-week high price. Analysts expect the company’s stock price to touch $60.57 in the next 12 months. This indicates an upside of ~12%.
Individual target prices on the stock range between $40–$85. D.A. Davidson has a price target of $59, FBR of $55, BofA of $49, and Susquehanna of $60.
ETF investors seeking to add exposure to LULU can consider the PowerShares Russell Midcap Pure Growth Portfolio ETF (PXMG), which invests 0.8% of its portfolio in LULU.