Raymond James Analyst Upwardly Revises The Target Price Of Lululemon Athletica

Raymond James Analyst Upwardly Revises The Target Price Of Lululemon Athletica
June 1, 2020

 

Shares of athletic retailer Lululemon Athletica Inc (Nasdaq: LULU) gained $15.67 or 5.51% to close at $300.10 after Matthew McClintock, an analyst at Raymond James upwardly revised its target price to the highest level among Wall Street estimates. The equity research firm underlined that Lululemon is the best stock for long-term investment as it is a clear winner in the retail domain. The stock hit a new 52-week high of $301.49 Friday.

McClintock believes that the Vancouver, Canada-based company will increase its market share in the athletic apparel business, driven by innovation and a dedicated client base.

In a note to clients, the equity analyst had the following to say about the yoga-pants maker: “We believe LULU’s dominance in the growing athletic apparel market will continue to increase as its innovation machine continues to deliver exciting and unique product to its loyal customer base.”

McClintock also upwardly revised the fiscal 2020 first-quarter earnings, but the figures still indicate huge decreases from fiscal 2019. The company announced that its financial results for the 1Q 2020 would be published on June 11, 2020.

McClintock said: “The central takeaway here is that near-term earnings declines are transitory and that, more importantly, the current crisis only accelerates LULU’s favorable positioning as a leader in the athletic apparel market.”

The analysts have pointed out that working from home is becoming a norm, and consumers are becoming increasingly conscious about their health and wellbeing.

His note to clients reads as follows: “Importantly, we think these trends likely have legs (which positions Lululemon very well) as working from home becomes more broadly accepted and consumers double down on their focus on health and wellness.”

He acknowledged that gross margins could be under pressure in the months ahead, but believes that Lululemon won’t be compelled to limit the range of products being offered as clothing is not seasonal,” and the company is known for effective management of its supply chain, in comparison with other retail chains.  Additionally, he said that “in today’s market, investors are focusing on the incremental change, and…relative improvement should be looked upon favorably.”

A week before, the company revealed that it had reopened over 150 of its stores, including those in Europe, Australia, North America, Asia, and New Zealand. In the forthcoming weeks, Lululemon expects 200 more re-openings, and if that goes through successfully, then the gradual opening strategy will continue.

Based on the above arguments, Raymond James maintained its “buy” rating on the stock, but raised its target price to $335 per share, from $250 per share issued earlier. The latest target reflects a premium of about 10% from Friday’s closing price. The upward revision of the target price is anticipated to keep Lululemon bullish in the short-term.

The historical price chart indicates that the stock has broken the resistance at 230. The stochastic oscillator is in the bullish region. Additionally, the stock is also trading above its 50-day moving average. Therefore, we anticipate the stock to move up in the short-term.

lulu - technical analysis - 1st June 2020

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Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world


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