2023-08-23 15:27:25
BRP will release its financial results for the second quarter of its 2024 fiscal year on September 7. (Picture: courtesy)
What to do with titles from Lululemon, Celestica and BRP? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from that expressed.
Lululemon (LULU, US$384.90): A high-quality growth story
Sportswear maker Lululemon will report its second-quarter fiscal 2023 results on August 31, and Bank of America analyst Lorraine Hutchinson expects earnings per share of US$2.51, which is in line with the analyst consensus forecast.
However, it believes that sales and gross profit margins might surprise on the upside. For the quarter, the analyst expects sales to rise 15.7% and profit margins to 220 basis points, as well as a decline of 220 basis points in selling, general and administrative expenses .
“Our diversified growth scenario remains intact. We anticipate balanced revenue growth that will come from various channels, products and menswear,” she said.
The latter specifies that international sales will continue to fuel the company’s growth, particularly in China. “China accounted for 18% of establishments and 12% of company sales at the end of the first quarter of 2023. The macroeconomic environment has deteriorated in China, but the company’s presence in this country is much smaller. than those of other companies in the sector. We believe that a catch-up might allow Lululemon to compensate for the economic weaknesses of the moment,” she explains.
In his opinion, Lululemon is continuing its momentum in China (sales up 79% year-on-year in the first quarter) despite a more difficult macroeconomic environment, which should give investors confidence. “As sales in China continue to grow on a large scale, we expect profit margins in that country to exceed those in the company’s most profitable region, which is North America,” he said. She.
Lorraine Hutchinson reiterates her buy recommendation on Lululemon stock and her one-year target price of US$450. “Our target price gives the company a valuation of 19 times earnings before interest, taxes, depreciation and amortization (EBITDA) for fiscal year 2024, which is currently 16 times.”
She points out that over the past eight years, Lululemon’s stock has traded at a higher price-earnings ratio (6x premium) than Nike’s, while the current premium is only 2. 5 times.
If the company’s sales continue to grow above average and Lululemon and profit margins continue to improve, the analyst expects the premium to rise once more.
Celestica (CLS, US$20.68): Robust predictions for 2023 and 2024 in artificial intelligence
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