Stock Analysis & Ideas

Lululemon Continues to Flex its Energy; Website Visits Hinted at it

Lululemon Athletica Inc. (LULU), a Canadian retailer of athletic and lifestyle apparel, is gaining traction. The company once again impressed its investors with outstanding fourth-quarter results.

Surprisingly, the new TipRanks monthly website visits metric already indicated that Lululemon would deliver strong revenues in the fourth quarter.

Lululemon’s Q4 revenues were $2.1 billion, which spiked 23% year-over-year. Comparable store sales and direct-to-consumer net revenue, in particular, increased 32% and 17%, respectively, acting as tailwinds.

The ability to reveal a website’s total estimated traffic even before an earnings release is one of the most useful features of the new tool. The statistics for revealed a clear upward trend.

More specifically, the graph below indicates that total anticipated website visitors to increased 33.2% sequentially to 31.2 million in the fourth quarter.

Other Note-Worthy Points

Aside from impressive top-line growth, Lululemon reported EPS of $3.37 per share, up 30.6% year-over-year and exceeding the $3.27 consensus forecast.

In addition, the company gave a positive outlook, which is a crucial component in retaining investors these days. Lululemon expects revenue of $1.525 billion to $1.55 billion in the first quarter, which is better than analysts’ projections of $1.4 billion. Meanwhile, EPS is expected to come in the range of $1.38 – $1.43, compared to a consensus estimate of $1.29.

The authorization of a new stock repurchase program was another bright spot in the quarter. The company’s board of directors approved a fresh stock repurchase program worth up to $1 billion, which pleased shareholders.

Expert’s Comment

Following the Q4 print, most analysts were upbeat about the stock. Guggenheim analyst Robert Drbul is one such analyst, who expects supply chain hurdles in the first quarter but sees plenty of reasons to be optimistic.

In his recent report, he wrote that, “We are encouraged by the continued broad strength across LULU’s product portfolio and expect the brand to deliver strong results throughout FY22E, as active/casual and health/wellness trends remain firmly intact.”

According to Drbul, Lululemon’s strong worldwide footprint should support “robust top-line growth” and “structurally higher operating margins” in the near future.

To that end, he maintained a Buy rating on Lululemon with a price target of $475.

Wall Street’s Take

Wall Street analysts are cautiously optimistic about Lululemon, with a Moderate Buy consensus rating based on 17 Buys, seven Holds, and one Sell. The average Lululemon stock prediction of $422.00 implies upside potential of approximately 12% to current levels for this stock.

Bottom line

Lululemon appears to be a fundamentally sound firm that should continue to increase its top and bottom lines as new and innovative products inspire consumers to live a healthy lifestyle and help the company to expand into new markets.

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