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

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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. (NASDAQ: 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. 

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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 (NYSE: NKE) and Under Armour Inc (NYSE: 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.

Related Links:

Jim Cramer On Lululemon: Good Business But 'Toxic' Stock

Under Armour Downgraded As Nike Price Wars Intensify

 

Related Articles (LULU + NKE)

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