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Will This Price Target Decrease Hurt Lululemon (LULU) Today?

NEW YORK (TheStreet) -- Lululemon (LULU) has had its price target downwardly revised to $69 from $73, Canaccord Genuity said Tuesday. The revision comes ahead of the retailer's quarterly report scheduled for release before the bell Thursday. The firm said it believes Lululemon will likely issue 2014 guidance below estimates. 

"Given the confluence of macro (weather-related store closures) and company-specific issues (improving yet suboptimal product flow) that has likely impacted Q1, we are taking a more conservative view on our 2014 sales/EPS estimates," analysts wrote in the report. 

Canaccord reiterated the stock as a "buy."

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Separately, TheStreet Ratings team rates LULULEMON ATHLETICA INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate LULULEMON ATHLETICA INC (LULU) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • LULU's revenue growth has slightly outpaced the industry average of 14.2%. Since the same quarter one year prior, revenues rose by 20.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • LULU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 6.48, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for LULULEMON ATHLETICA INC is rather high; currently it is at 57.26%. Regardless of LULU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LULU's net profit margin of 17.40% compares favorably to the industry average.
  • Net operating cash flow has significantly decreased to $23.88 million or 51.98% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • LULU has underperformed the S&P 500 Index, declining 23.71% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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