Stifel Sees Opportunity In Lululemon Pullback, Highlights 'Powerful Business Model'

Lululemon Athletica inc. LULU received an early Christmas present Sunday in the form of a new sell-side bull. 

The Analyst 

Stifel analyst Jim Duffy upgraded Lululemon from Hold to Buy with a $151 price target.

The Thesis

After delivering several quarters of impressive growth, Lululemon is inevitably facing difficult compares, Duffy said in a note — but the analyst believes double-digit revenue growth can continue. (See his track record here.)

“We view lululemon as one of the highest quality companies in our coverage, and with e-commerce execution now more than 25 percent of revenue, we view it as arguably the most powerful business model."

Despite broader market uncertainty, Duffy said the latest pullback in lululemon shares is an entry point for a high-quality, large-cap growth business with runway.

The apparel brand is only getting started when it comes to executing its e-commerce potential, and trends are playing favorably into the company’s ethos, Duffy said. 

“With market tailwinds from growing global concern for health, fitness and self-actualization, we believe lululemon has a long runway for global growth and advocate owning shares as a core holding."

Lululemon's 2020 objectives of $4 billion in revenue and implied earnings power of $5 are low hurdles, the analyst said. 

Price Action

Lululemon Athletica shares were down 0.1 percent at $119 at the time of publication Monday. 

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