Lululemon Athletica (NASDAQ:LULU) has entered TipRanks’ “Perfect 10” Smart Score list, which includes stocks with a higher potential to outperform the benchmark index.
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Note: Shares with a “Perfect 10” Smart Score have historically outperformed the benchmark index.
Here’s What’s Behind LULU’s Entry to the “Perfect 10” Smart Score List
Lululemon’s entry to the “Perfect 10” list follows the company’s stellar financial performance despite the challenging economic environment. LULU’s top line increased 29% year-over-year in the second quarter of fiscal 2022. Further, compared to 2019 levels, LULU’s revenues increased by 112%, reflecting a CAGR of 28%, which is encouraging.
Lululemon’s robust revenues are supported by solid demand, product innovation, and omnichannel offerings.
Thanks to the ongoing momentum, Lululemon is confident of doubling its revenue by 2026 (revenue is projected to increase to $12.5 billion by 2026 from $6.25 billion in 2021). This growth will likely be driven by strength in men’s and digital revenues. Further, Lululemon expects its international revenue to quadruple during the same period.
Highlighting Lululemon’s aggressive five-year growth plan, Guggenheim analyst Robert Drbul said, “This framework includes a variety of initiatives aimed to present significant opportunities for both top-and-bottom-line growth.”
Drbul is impressed with the “continued broad strength across LULU’s product portfolio” despite sector-related headwinds.
Is Lululemon Overvalued or Undervalued?
Lululemon stock is looking expensive on the valuation front (it has a forward price-to-earnings multiple of 28.65). On LULU’s premium valuation, Drbul said, “We believe the company’s strong financial performance is supported by continued momentum and expansion in the business globally and justify the shares’ premium valuation.”
Bottom Line
The continued strong demand for its products, market expansion, and solid growth outlook make Lululemon an attractive stock. LULU has a Strong Buy consensus rating on TipRanks based on 18 Buy, two Hold, and one Sell recommendations. Further, analysts’ average price target of $397.82 implies 20.42% upside potential.
LULU stock also has positive signals from hedge fund managers, who bought 36.2K shares last quarter. Overall, Lululemon stock has an Outperform Smart Score of “Perfect 10” on TipRanks.
