TD Cowen raises Lululemon stock price target to $373

TD Cowen raised its price target for Lululemon to $373 from $370, maintaining a Buy rating, citing the company's ability to manage potential tariff impacts through strategic pricing, potentially increasing Average Unit Retail (AUR) in North America by mid-single-digits. The assessment is supported by Lululemon's strong gross profit margins (59.2%) and a balance sheet with more cash than debt. Other analysts have mixed views; Stifel maintains a Buy rating expecting strong Q1 2025 results, while BNP Paribas Exane reiterated an Underperform rating, citing concerns over North America and pricing.

Analysis

TD Cowen has revised its price target for Lululemon Athletica Inc. (LULU) upwards to $373 from $370, maintaining a Buy rating, based on an assessment of the company's capacity to mitigate potential tariff impacts. Analysts estimate a possible 50 basis point hit to EBIT margin from tariffs, which they believe Lululemon can offset through a mid-single-digit percentage increase in Average Unit Retail (AUR) in North America. This positive outlook is underpinned by Lululemon's impressive gross profit margins of 59.2% and a robust balance sheet featuring more cash than debt, offering financial flexibility. TD Cowen's earnings per share (EPS) estimates for Lululemon exceed market consensus and are positioned at the upper end of the company's fiscal year EPS guidance, which they anticipate management will reaffirm. The company's earnings report is imminent, due in three days. Other analysts present a mixed picture: Stifel also holds a Buy rating, expecting Lululemon to surpass Q1 2025 earnings estimates and maintain its full-year guidance, citing strong U.S. customer conversion and international growth, especially in China. Citi, while maintaining a Neutral rating, raised its price target to $325, foreseeing a potential Q1 earnings beat driven by stronger sales in the Americas and China. Conversely, BNP Paribas Exane reiterated an Underperform rating due to concerns about the North American market and pricing strategy. Evercore ISI reduced its price target to $320 but maintained an Outperform rating, noting a flexible inventory strategy and manageable tariff situation, while Piper Sandler adjusted its price target to $280 with a Neutral rating, expressing concerns about Lululemon's ability to handle cost pressures through higher pricing. The general sentiment is moderately positive, with a notably more positive sentiment specific to LULU, despite the varied analyst perspectives.

Key Decisions for Investors

• Investors should closely monitor Lululemon's upcoming earnings report, expected in three days, for confirmation of management's guidance and details on tariff mitigation strategies, particularly concerning Average Unit Retail adjustments in North America.
• Consider the divergence in analyst opinions as a key factor; while TD Cowen and Stifel are bullish on earnings and pricing power, concerns from BNP Paribas Exane and Piper Sandler regarding North American market conditions and cost pressures warrant careful risk assessment.
• Evaluate Lululemon's strong financial health, including its 59.2% gross profit margin and net cash position, as potential buffers against macroeconomic headwinds and tariff impacts when making investment decisions.