Barclays Remains Very Bullish On Lululemon

Reviewing Lululemon Athletica inc.'s LULU third quarter results, Barclays said it remains very bullish on the stock, given its top-line momentum, robust innovation pipeline and continued margin recovery.

Analyst Matthew McClintock noted that the company reported third quarter adjusted earnings of $0.47 per share, above its $0.44 per share estimate, helped by higher than expected revenue and gross margin expansion. Revenues of $544.4 million, up 13.5 percent year-over-year, also beat the firm's $542.1 million estimate.

The analyst also noted that comps rose 7 percent, with 4 percent growth at brick and mortar stores and 16 percent growth for e-commerce. Gross margin expanded 420 basis points to 51.1 percent, while SG&A rate rose 140 basis points to 34.1 percent, the firm added.

Strong Pipeline of Innovation

Barclays pointed to the company's comments on upcoming product innovation in the bra category and in men's such as abrasion yarns and thermal regulating capabilities. The firm believes the company's strong pipeline of innovation would help MSD comps target, going forward.

Valuation to Expand

The firm expects the company's multiple to expand, as there are very few names in the retail space that can deliver 20+ percentage earnings growth. As such, Barclays has an Overweight rating and a $85 price target on shares.

At the time of writing, Lululemon was rallying 17.25 percent at $70.16.