Founded in 1998, Lululemon Athletica (LULU) is based in Vancouver, Canada, though it is incorporated in Delaware and its financial results are reported in U.S. dollars, notes John Staszak, an analyst with Argus Research, an independent Wall Street research firm.
The company designs and sells athletic apparel, and markets its yoga-inspired clothing under the lululemon athletica and ivivva athletica brand names. It also sells fitness pants, shorts, tops and jackets designed for running and other sports.
Lululemon has a strong brand and growing direct-to-consumer sales, which we expect will lead to higher margins over the next several years. In addition, we expect revenue growth from the expansion of the company’s men’s clothing line.
With relatively few stores outside North America, the company also has substantial opportunities for international expansion, particularly in China. In all, we believe that the company’s prospects are among the best in the apparel sector.
We think that LULU shares are attractively valued at recent prices near. The shares have traded in a range of $269-$486 over the past year and are currently near the top of that range. On a technical basis, the shares have been in a bullish pattern of higher highs and higher lows that dates to May 2017.
On the fundamentals, LULU shares are trading at 48.5-times our revised FY23 EPS estimate, above the five-year average of 42. We believe that they deserve to trade at higher multiples given the company’s increasing comp sales, strong brands, and prospects for continued growth.
Our revised price target of $530 implies a multiple of 56.1-times our revised FY23 estimate. We are maintaining our "buy" rating o Lululemon Athletica and raising our target price to $530 from $500.
