Lululemon's Q2 Print Could Be A Comp Rebound Story; Bank Of America Issues Double Upgrade

Analysts at Bank of America turned bullish on Lululemon Athletica inc. LULU ahead of the retailer's second-quarter earnings report. The firm's Rafe Jadrosich upgraded Lululemon's stock rating from Underperform to Buy with a price target increase from $49 to $70.

Lululemon is scheduled to report Q2 results on Aug. 31, and the print should provide evidence of sustained momentum, Jadrosich said in a Monday note. Same-store sales are expected to read 5 percent in Q2, the analyst said. 

Same-store sales in the quarter likely benefited from: acceleration in e-commerce, momentum in the men's category, new product launches in the female category such as Nulux and Enlite bra, the launch of a global brand campaign and sequential improvements in merchandising products, according to the Bank of America note. 

Lululemon likely also gained market share from Nike Inc NKE and Under Armour Inc UAA, both of which are suffering from a "lack of innovation" and other woes, Jadrosich said. 

Looking forward to the full fiscal year, the analyst now expects the athleisurewear company to earn $2.40 per share, up from a prior estimate of $2.29 per share. Jadrosich also boosted his 2018 EPS estimates from $2.58 to $2.78 per share, and his revised $70 price target is based on a 25x multiple (up from a prior 19x multiple) on next year's estimates.

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