Lululemon Athletica's shares could reach $600 per share by early 2025, nearly double its current price of the middle $300s.

That's according to Quo Vadis Capital President John Zolidis, a long-time bull of LULU.

"Our model is generating both EPS and FCF/ share above $20 by FY26," he explained in a letter to his subscribers. "(This compares to FY23 around $12 for EPS and $10 for FCF/ Share.) If you believe the stock can get a 30 P/E (justified by ~28%-29% EBITDA margins and vs. a ten-year average P/E of >33x) this suggests a $600 per share value by early 2025."

Zolidis' estimates aren't that far from GuruFocus' $590.28 per share intrinsic value calculation.

This week, the Vancouver, British Columbia-based athletic gear maker reported fourth-quarter 2022 financial results that beat top and bottom-line analysts' estimates and gave upbeat guidance for the rest of the year.

Gross profit rose 55% to $1.5 billion from a year ago, though gross margins declined to 55.1% from 58.1% over the same period. In addition, total net revenue increased 30% to $2.8 billion, thanks to higher company-operated store net revenue and new store openings.

That's a 26% three-year compound annual growth rate ("CAGR"), an impressive performance in a challenging macroeconomic and retailing environment.

"In the fourth quarter and full year 2022, we delivered strong results across the business driven by our innovative products, powerful guest experiences and strategic market expansion," Lululemon Athletica CEO Calvin McDonald said following the release of the company's fourth-quarter financial results. "Our continued high level of performance is a reflection of the hard work and agility of our incredible teams and the deep connections they create with our guests and communities around the world. As we enter 2023, we look forward to another year of strong momentum across the globe and delivering on our Power of Three ×2 growth plan."

Launched a couple of years ago, the Power of Three growth plan is a driver of product innovation– introducing new product lines supporting yoga, running and training, an office/travel/commute category and pursuing new opportunities such as self-care.

Then there's Omni guest experiences — the offering of an integrated guest experience across channels, inspiring, provoking and celebrating guests living a healthy and mindful lifestyle.

And there's the opening of new stores at home and abroad, adding to the sales momentum. According to Statista, as of 2022, LULU had 324 stores in the U.S., up from 285 in 2019 and 86 in China, up from 22 over the same period, while the number of stores in its home-Canadian market remained roughly the same in the low 60s.

Still, there's more: word of mouth (WOM) and buzz for the company's brand, which creates a "moat" that keeps competitors in its market. Moreover, it gives LULU plenty of pricing power over competitive products, translating to higher profit margins and economic value added (EVA).

According to GuruFocus' calculations, LULU has maintained an EVA in the low 30s in the last five years, meaning that its management has been doing a great job managing other people's money.

Will LULU maintain the growth rate and margins? Zolidis, who rates the company's shares BUY, thinks so.

"The company has kept it going much longer than nearly all others," he said. "Bottom-line, after two years of the stock moving sideways despite consistent upward revisions to earnings, last night's results could be the event that sets off a round of valuation expansion and vaults the name firmly back into the momentum camp. Certainly, this profile is not for everyone but for those already involved, we feel that playing for additional gains is supported by the fundamentals and outlook."

Editor's note: The author owns shares of Lululemon.

The logo for Lululemon Athletica is seen outside a retail store in New York City, U.S., March 30, 2017.
The logo for Lululemon Athletica is seen outside a retail store in New York City, U.S., March 30, 2017. Reuters / Brendan McDermid