Time to Buy Lululemon's (LULU) Stock for a Rebound as Q2 Earnings Approach?
Outside of Nvidia NVDA, Wall Street will be closely monitoring Q2 results from Lululemon LULU this week with the athletic apparel giant set to report after market hours on Thursday, August 29.
Despite being renowned for its loyal customer base, Lululemon’s stock has plummeted this year on fears of a slowdown in consumer spending along with the presumptions of increased competition from the likes of Nike NKE, Adidas ADDYY, and Under Armour UAA.
That said, let’s see if the selloff in Lululemon’s stock is overdone and if it's time to buy LULU for a rebound as earnings approach.
LULU’s Q2 Expectations
Lululemon’s Q2 sales are expected to increase 9% to $2.4 billion based on Zacks estimates. Earnings are also projected to rise 9% to $2.93 per share versus Q2 EPS of $2.68 in the prior-year quarter.
Notably, Lululemon has surpassed the Zacks EPS Consensus for 16 consecutive quarters posting an average earnings surprise of 7.42% in its last four quarterly reports.
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Monitoring LULU’s Growth Trajectory
Overall, Lululemon’s total sales are now projected to rise 10% in its current fiscal 2025 and are expected to increase another 8% in FY26 to $11.46 billion. Lululemon’s bottom line is currently slated to expand 10% in FY25 as well with annual earnings projected to rise another 9% in FY26 to $15.31 per share.
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Price Performance & Valuation Comparison
Year to date, Lululemon’s stock has plunged nearly -50% to vastly underperform the S&P 500’s +18% and Adidas’s +24%. Lululemon has also trailed the lackluster YTD performance of Nike and Under Armour which are down -23% and -10% respectively.
Giving up most of its lofty gains in recent years, Lululemon’s stock is still up +38% over the last five years which has lagged the broader market but has topped Adidas, Nike, and Under Armour.
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Trading around $255 a share, LULU trades at 19.1X forward earnings and a slight discount to the benchmark’s 23.7X. LULU also trades nicely beneath Nike’s 27.5X forward earnings multiple and a significant discount to Adidas's 69.3X and Under Armour’s 38X.
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Takeaway
While broader economic concerns impacting Lululemon’s stock appear to be overdone considering its attractive valuation, LULU lands a Zacks Rank #3 (Hold). To that point, reaching or exceeding Q2 expectations will be crucial to shaking these fears and reconfirming Lululemon’s attractive growth trajectory but long-term investors may certainly be rewarded from current levels.
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lululemon athletica inc. (LULU) : Free Stock Analysis Report
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Adidas AG (ADDYY) : Free Stock Analysis Report
Under Armour, Inc. (UAA) : Free Stock Analysis Report