Retail company Lululemon (LULU) is set to report its Q2 earnings results on September 4 after the market closes. Analysts are expecting earnings per share to come in at $2.86 on revenue of $2.54 billion. This compares to last year’s figures of $3.15 and $2.37 billion, respectively. Interestingly, LULU has a strong track record when it comes to beating earnings. In fact, it has done so in each of its last 15 quarters. However, analysts don’t seem to be optimistic this time around.
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Indeed, although investment firm Needham has a Buy rating, it lowered its price target on Lululemon from $317 to $238. Four-star analyst Tom Nikic is concerned about a surge in discounted products online, which could negatively impact Lululemon’s Q2 performance and lead to lower guidance. This is because e-commerce makes up a huge chunk of Lululemon’s sales, as pictured below. Still, Needham believes that this risk is already factored into the share price, as the stock is trading at a 14-times earnings multiple. For reference, this is its lowest level since the 2008 recession.
Separately, five-star Citi analyst Paul Lejuez also lowered his price target on Lululemon, going from $270 to $220, while maintaining a Neutral rating. The firm expects a small earnings beat for Q2 but warns that guidance could be cut due to higher tariffs. Nevertheless, despite concerns about the company’s future profits, Citi believes that the stock is fairly valued at current levels, with risks and rewards appearing balanced.
What Do Options Traders Anticipate?
Using TipRanks’ Options tool, we can see what options traders are expecting from the stock immediately after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement. If this sounds complicated, don’t worry, the Options tool does this for you. Indeed, it currently says that options traders are expecting a 12.1% move in either direction.
Is LULU Stock a Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on LULU stock based on 13 Buys, 12 Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average LULU price target of $266.02 per share implies 34% upside potential. At the same time, TipRanks’ AI analyst has an Outperform rating and a $226 price target.
