Canaccord Remains Cautious on Lululemon Athletica inc. Despite Earnings, Guidance Beat
Lululemon Athletica inc. (NASDAQ:LULU) shares are on the rise on an earnings surprise in the first quarter. The company lifted full-year guidance after reporting first-quarter sales of $423.5 million, beating estimates for $418.8 million. However, Canaccord analyst Camilo Lyon remains cautious on shares, maintaining a Hold rating on the stock, with a price target of $55, which implies a downside of 16% from current levels.
Lyon wrote, “Our concerns about an inventory build heading into the quarter proved to be valid as inventory grew 31% vs. sales growth of 10%. We suspect this excess inventory build is related to the port delays; however, it nonetheless suggests incremental markdown risk going forward. Full-year EPS guidance was inched up by 1c, flowing through the Q1 beat. For Q2, the company expects to generate a HSD comp (likely markdown-driven given the bloated inventory position) and EPS of 31c-33c, below current consensus of 34c. We maintain our HOLD on LULU as we have yet to see the acceleration in comp trends implied in guidance to support the company’s valuation.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Camilo Lyon has a total average return of 8.5% and a 60.9% success rate. Lyon has an -15.9% average return when recommending LULU, and is ranked #444 out of 3614 analysts.
Out of the 30 analysts polled by TipRanks, 15 rate Lululemon Athletica Inc. stock a Buy, 12 rate the stock a Hold and 3 recommend a Sell. With a return potential of -20.3%, the stock’s consensus target price stands at $52.21.