President Donald Trump's trade tariffs and persisting inflation in the United States have pressured the outlook for businesses, particularly consumer retailers.
Analysts at Morgan Stanley lowered their price target on Lululemon Athletica Inc. (LULU) on Wednesday, ahead of the apparel and accessories retailer's earnings next week.
They cut the target to $411 from $420 and maintained an 'overweight' rating.
The adjustments come from what Morgan Staley sees as an "incrementally bearish" sentiment for parts of the retail sector and the expectation that Lululemon will give conservative annual guidance.
Shares gained 2%, rising in line with the broader market after the U.S. Federal Reserve kept interest rates steady.
The brokerage believes the bar heading into fiscal Q4 2024 "feels lower than just a few weeks ago" as market confidence in "a newness-driven Q1/H1 Americans/US inflection" has decreased.
In retail businesses, "newness" refers to seasonal updates in the product lineup.
Commentary from Lululemon’s management regarding Q4 and future prospects in the Americas will be crucial in determining the short-term trajectory of the stock, according to Morgan Stanley.
President Donald Trump's trade tariffs and persisting inflation in the United States have pressured the outlook for businesses, particularly consumer retailers.
Last week, Truist Securities analyst Joseph Civello reiterated a 'buy' on the stock and said the company's trending status on TikTok was particularly encouraging for the business.
In recent months, Oppenheimer slashed its price target on the stock to $500 from $380, while Evercore ISI raised it to $495 from $440.
On Stocktwits, the retail sentiment is 'neutral', largely unchanged over the past month. In this time, message volume has dropped 40%.
A user posted that based on technical charts LULU seemed to be a value buy ahead of its earnings.
Currently, 20 of the 35 analysts covering the stock have a 'buy' or higher rating, 11 rate 'hold' and four rate 'sell' or 'strong sell', according to Koyfin data. The average price target is $399.04.
Lululemon will report Q4 earnings after the markets close on March 27. Its shares currently trade at $329.57, down 13.6% year to date.
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