Lululemon surges 15% on earnings, guidance beat; Stifel says shares still 'undervalued'

(Updated - March 29, 2023 5:20 AM EDT)

Investing.com -- Lululemon Athletica Inc (NASDAQ: LULU) shares jumped after the athleisure apparel maker beat expectations for revenue and profit in the fourth quarter.

Revenue in the quarter rose 30%, to $2.8 billion and adjusted profit was $4.40 a share. Analysts expected Lulu to report revenue of $2.7B on adjusted profit of $4.26B.

Shares of Lulu are trading about 15% higher in pre-market Wednesday trading.

The company also said full-year revenue rose 30% to $8.1B and adjusted EPS for the year was $10.07. Analysts expected revenue of $8B and adjusted full-year earnings per share of $9.90.

CEO Calvin McDonald said the strong results were driven by Lulu’s “innovative products, powerful guest experiences, and strategic market expansion."

The company forecast fiscal first-quarter net revenue in a range of $1.89B to $1.93B and earnings per share of $1.93 to $2.00. For fiscal 2023 full year it expects revenue to be in a range of $9.3B to $9.41B and earnings per share of $11.50 to $11.72. Both forecasts are better than expected.

Wells Fargo analyst Ike Boruchow hiked the price target on LULU stock to $425 per share and urged clients to "stay long."

"Momentum back in the model, overhangs being removed. Their holiday miss was likely the bottom. Rate of change on margins/inventory is back in bulls favor, top-line trends remain robust and management is gaining credibility with regard to the MIRROR strategic shift. Finally, valuation should begin to revert back to historical norms," Boruchow wrote in a note to clients.

Stifel analyst Jim Duffy also raised the price target as he went to $460 per share. He believes LULU stock is a "core growth holding" and continues to view shares undervalued.

"Bearish discourse around slowing growth and promotional risk to margin has been silenced, and we expect focus returns to global growth opportunities," Duffy said.

By Liz Moyer and Senad Karaahmetovic

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