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Lululemon Athletica: Holiday Quarter Expectations and Stock Movement


Lululemon Athletica’s guidance for the upcoming holiday quarter has left some analysts skeptical about the future of the renowned athleisure wear company. However, the recent price movement of the stock tells a different story.

Randal Konik, a long-time Lululemon bear and analyst at Jefferies, rates the stock as Underperform with a $250 price target, implying a significant 46% decline from the stock’s closing price on Thursday.

Contrary to Konik’s expectations, investors seem to have a more optimistic outlook. On Friday, Lululemon’s shares surged by 5.8% to reach $491.75, potentially leading to a record close. Meanwhile, the S&P 500 experienced a slight decline of 0.1%.

During the company’s earnings conference call on Thursday evening, Lululemon management expressed concerns about a potential slowdown in consumer spending due to persistent inflationary pressures. This only reinforces Konik’s bearish stance.

“With a looming deceleration in U.S. consumer spending and high market expectations, we believe there is limited upside for the stock at this point,” noted Konik in his research note released on Friday.

However, it is important to highlight that Lululemon has been a standout performer in the retail sector this year. The company’s stock has soared by 47% in 2023, outperforming the broader S&P 500 index, which recorded a gain of 19%. Lululemon’s consistently impressive earnings and revenue results can be attributed to robust demand for its renowned leggings, belt bags, and other clothing items.

Lululemon Beats Wall Street Estimates in Strong Third Quarter

Lululemon, the popular athletic apparel company, has announced its impressive third-quarter earnings. The company reported earnings of $2.53 per share on revenue of $2.2 billion, surpassing Wall Street’s estimates of $2.28 per share and revenue of $2.12 billion. This also marks an increase from the same period last year when Lululemon recorded earnings of $2 per share on revenue of $1.86 billion.

Despite these strong results and the stock’s consistent rise throughout the year, there are some who remain skeptical. Konik, a prominent figure in the industry, expresses caution about Lululemon’s future prospects. In a research note released on Friday, he states, “We have strong conviction in our views that competition is rising, the belt bag trend is fading, and the consumer is slowing, which means the greatness of LULU will see the laws of gravity ensue in 2024.”

Lululemon has yet to respond to requests for comment regarding Konik’s concerns.

However, most analysts hold a more positive outlook for the company. According to FactSet, over 70% of analysts rate Lululemon’s stock as a Buy. BofA Securities analyst Lorraine Hutchinson is one such analyst who remains optimistic. Hutchinson recently increased her price target to $520 from $450 and maintained her Buy rating on the stock. In a research note, she explains, “We continue to think LULU’s robust innovation pipeline will result in outsized market share gains and strong earnings growth.”

Overall, Lululemon’s exceptional third-quarter performance highlights its continued success in the market. Despite varying opinions, it seems that the company’s innovative approach and dedication to meeting consumer demands have solidified its position as a major player in the athletic apparel industry.

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