Elliott Investment Management’s new stake in lululemon athletica (LULU) and its push for Jane Nielsen as a potential CEO arrive just as Calvin McDonald prepares to exit and the company ramps up an aggressive global expansion.
See our latest analysis for lululemon athletica.
The activist stake and CEO search have arrived just as sentiment starts to thaw, with a roughly 26% one month share price return contrasting sharply with a roughly 45% one year total shareholder loss. This suggests early but fragile momentum.
If this kind of turnaround story has your attention, it might be a good time to explore fast growing stocks with high insider ownership for other potential growth leaders backed by committed insiders.
With shares still down about 45% over the past year despite a recent bounce, activist pressure building, and international growth accelerating, is lululemon now mispriced value, or is the market already discounting a successful turnaround and renewed expansion?
With lululemon athletica closing at $209.45 against a narrative fair value near $190, the story leans toward optimism that the market may be overextending.
The analysts have a consensus price target of $206.168 for lululemon athletica based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $303.0, and the most bearish reporting a price target of just $100.0.
Want to see what kind of modest growth, easing margins and future earnings multiple still justify a richer price than today, despite all that uncertainty? Read on.
Result: Fair Value of $190.19 (OVERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, stubborn U.S. weakness and intense athleisure competition could quickly erode margins and stall the turnaround that investors are tentatively starting to price in.
Find out about the key risks to this lululemon athletica narrative.
On earnings power, lululemon looks very different. At about 14.1 times earnings versus a fair ratio of 17.5 times, and well below the US Luxury average of 20.2 times and peer average of 51.2 times, the stock screens as discounted. Is the market mispricing execution risk or spotting a deeper slowdown?
See what the numbers say about this price — find out in our valuation breakdown.
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