Lululemon Brand Revenue Could Double From Current Levels

Baird included Lululemon Athletica inc. LULU in its Focus Ideas report for June. Analyst Mark R. Altschwager shared a growth overview of the company, and set a $76 price target on the stock, noting that, even though the shares are currently trading slightly above multi-year averages, the firm’s experts believe multiple expansion is likely, given that comp growth remain strong and that the company manages to “deliver on its margin inflection.”

The note started by looking into the stock’s catalysts, which include earnings upside on sustained gross sales strength and an improvement in product margins.

Related Link: Credit Suisse Previews Lululemon Q1 Earnings, Calls Top Line An 'Incremental Risk'

Other factors that warrant Lululemon’s inclusion in Baird’s Focus Ideas list were:

• The company’s leading position in the expanding activewear market (which is growing at double digits among women, NPD estimates), its loyal client base and its differentiating innovative design.
• The prediction that brand revenue could double long term, driven by strength in domestic and international markets.
• The expectation that earnings could return to growth in 2016, after three years of flattish results.
• The projection that Lululemon could post about 20 percent CAGR over the next five years.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.