Why Lululemon Is Guggenheim's 'Best Idea'

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Shares of Lululemon Athletica inc. LULU are up about 2.3 percent on Tuesday afternoon, after Guggenheim analyst Howard Tubin designated the stock as the firm’s Best Idea. According to a report issued Tuesday, the experts believe the business’ underlying momentum remains strong, and expect comp growth to continue through 2015.

Once again, the firm is seeing remarkable “product excitement and innovation that historically drove the business incorporated within the assortments.” They anticipate this “newness” factor will grow over the year and contribute to ameliorating earnings growth rates.

Lululemon’s pricing is certainly a concern to many analysts and investors. However, Guggenheim conducted a proprietary pricing survey across eight of the company’s competitors and discovered the pricing differential is not "dramatic."

Related Link: Lululemon Bears 'Running Out Of Arguments,' Barclays Says

The experts also highlight their belief that, “despite running a predominantly full-price business, there is significant value to be found within the LULU assortments.” This belief is based on:

  • “The technicality and bells & whistles incorporated into the garments,”
  • The management’s unique way of taking cues from current fashion trends and incorporating them into the product mix
  • The offering of select items that the firm calls “two-fers.” A two-fer is “a single garment that provides two distinct functions,” the analysts explain.

Guggenheim maintains a Buy rating and $80.00 price target on shares of Lululemon.

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Posted In: Analyst ColorLong IdeasPrice TargetReiterationAnalyst RatingsTrading IdeasGuggenheimHoward Tubin
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