Market Overview

Cautious Sentiment In Lululemon May Be Overdone Ahead Of Q3 Earnings

Share:
Cautious Sentiment In Lululemon May Be Overdone Ahead Of Q3 Earnings

Cowen’s Oliver Chen believes a large part of the pressure being faced by Lululemon Athletica inc. (NASDAQ: LULU) recently has been driven by fears regarding comps and margin due to higher-than-expected discounting.

Chen maintains an Outperform rating on the company, while lowering the price target from $80 to $72.

Some Caution Needed

The analyst believes it would be “prudent for investors to have some caution into 3Q print on Wed, & incoming client sentiment seems to largely prefer to profit from caution.”

This is because traffic might have slowed in the first half of November, while markdown levels appear high at the clearance stores and online.

Chen recommends buying the stock on potential weakness on Wednesday, in case the results disappoint.

The Silver Linings

At the same time, the analyst also pointed toward some positives, such as the robust traffic in September/October and the markdown levels being in line with expectations and lower than the same period a year ago.

Chen also believes Lululemon has been using its online store more strategically in 2016, especially the “We Made Too Much” sale section, “given improved omnichannel integration.”

This means that while the individual SKU counts might have risen in the clearance section online, the inventory levels are unlikely to be too deep.

In addition, not only has the fuller price non-clearance stores recorded clearance in line with the year ago levels, but the company has successfully sold through racks of products.

Shortly after Monday's opening bell, Lululemon was seen up 1.34 percent at $56.05.

Latest Ratings for LULU

DateFirmActionFromTo
Nov 2020Morgan StanleyMaintainsEqual-Weight
Oct 2020Deutsche BankUpgradesHoldBuy
Oct 2020Morgan StanleyMaintainsEqual-Weight

View More Analyst Ratings for LULU
View the Latest Analyst Ratings

 

Related Articles (LULU)

View Comments and Join the Discussion!

Posted-In: Cowen and CompanyAnalyst Color Long Ideas News Price Target Analyst Ratings Movers Trading Ideas Best of Benzinga

Latest Ratings

StockFirmActionPT
GBTRBC CapitalInitiates Coverage On75.0
CCSSusquehannaInitiates Coverage On54.0
ZSWedbushMaintains185.0
SNPSCredit SuisseMaintains265.0
SNOWCredit SuisseMaintains265.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com