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Luke Kawa

AppLovin enjoys wave of price target hikes after posting better than expected quarterly results

AppLovin is rising in premarket trading, after the ad tech company yesterday reported top- and bottom-line results that modestly exceeded expectations and posted guidance for the current quarter that struck a similar chord.

Wall Street is reveling in the results with a boatload of price target hikes: UBS to $840 from $810, Piper Sandler to $800 from $740, Wedbush also to $800 from $745, Scotiabank to $750 from $575, Goldman Sachs to $720 from $630, BTIG to $705 from $693, and JPMorgan to $650 from $425.

The Q3 numbers:

  • Revenue: $1.41 billion (compared to an analyst consensus estimate of $1.34 billion and guidance for $1.33 billion)

  • Adjusted EBITDA: $1.16 billion (estimate: $1.09 billion, guidance: $1.08 billion)

Q4 guidance:

  • Revenue: $1.585 billion (estimate: $1.54 billion)

  • Adjusted EBITDA: $1.315 billion (estimate: $1.27 billion)

Shares are up more than 2% as of 9:45 a.m. ET.

After its Q2 report, CEO Adam Foroughi said that the real “fun” starts this quarter, as the company began to open its self-service ad portal on a referral basis on October 1. Bank of America analyst Omar Dessouky is especially bullish on this channel, expecting the company to book 4,000 large advertisers after the portal becomes fully available for onboards in the first half of 2026.

However, Q4 has not been fun for the ad tech company thus far. Shares are down about 15% since the end of September, with the bulk of the decline catalyzed by a report that the SEC is investigating its data collection practices, which was followed by another report indicating that multiple state regulators are also looking into the same matter.

“Legal risk lingers: AppLovin has denied short-seller claims about its Array product, which was later shut down amid possible probes by the SEC and some US state regulators,” Bloomberg Intelligence technology analyst Nathan Naidu wrote ahead of this report. “A related class-action suit filed in March could cost up to $750 million if it proceeds to trial.”

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Helena Cheng

Lululemon’s stretch getting tested: Stock plunges after after outlook is cut

Lululemon shares are down double digits in premarket trading after the company cut its full-year sales and profit outlook, overshadowing a Q1 beat and raising fresh concerns about the brand’s turnaround efforts.

The company now expects fiscal 2026 revenue to be flat to down 1%, compared with its prior forecast for 2% to 4% growth. Guidance for full-year diluted earnings per share was dragged down to a range of $10.95 to $11.15, below the company’s previous guidance of $12.10 to $12.30 and well below Wall Street’s estimate of $13.26.

Key numbers for Q1:

  • EPS of $1.69 vs. the $1.68 expected.

  • Revenue of $2.47 billion vs. the $2.43 billion expected.

The modest top-line beat masked a widening divergence between Lululemon’s geographic markets. While international revenue rose 22% overall with a 30% increase in Mainland China, the bigger problem remains North America, where revenue fell 5%.

Interim co-CEO and CFO Meghan Frank acknowledged during the earnings call that recent product rollouts underperformed. A highly anticipated yoga campaign failed to generate its expected “halo effect” across broader product lines.

Profitability metrics took a major hit, with gross margins contracting by 410 basis points to 54.2% due to mounting tariff costs and promotional markdowns. Operating income consequently fell 37% year over year to $276.9 million.

“We experienced spikes of negative commentary in the media and on social channels with regard to our brand, which had an impact on traffic and overall top-line performance,” Frank said during the earnings call. “And second, not all of our product launches have met our expectations. While we have had several successful launches so far this year, we have seen others as we start Q2 not generate the anticipated guest response.”

Lululemon’s valuation has already been steadily compressing for years. While it was once one of retail’s richly valued stocks, investors have been questioning whether the company can return to the double-digit growth era.

The results also arrive during a leadership transition. Lululemon announced back in April that former Nike executive Heidi O’Neill is set to take over as CEO in September, with investors looking to her to revive growth in North America and restore the brand’s growth.

As Lululemon faces both macroeconomic pressure and brand-specific challenges, its stock has dropped around 40% year to date.

markets
Paige Oamek

US job growth skyrocketed in May, blasting past expectations

The US economy added 172,000 jobs in the month of May, the Bureau of Labor Statistics reported Friday, sending 10-year Treasury yields higher.

The strong May job market surprised economists. Experts had predicted only 85,000 new jobs — just half the reported number. The unemployment rate held steady at 4.3%, as expected.

The job growth story is a hopeful spot for the economy as consumers continue to feel inflationary pressure from the Iran war.

Job gains were buoyed by the leisure and hospitality sector, which added 70,000 jobs, as well as local government, healthcare, and education.

Both the March and April jobs reports were revised upward, making them collectively 93,000 higher than previously reported.

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