Market Overview

Lululemon, Ulta Valuations Send Nomura To The Sidelines

Lululemon, Ulta Valuations Send Nomura To The Sidelines

Nomura is moving to the sidelines on Lululemon Athletica inc. (NASDAQ: LULU) and Ulta Beauty Inc (NASDAQ: ULTA).

The Analyst

Analyst Simeon Siegel downgraded Ulta from Buy to Neutral and raised the price target from $305 to $311.

Siegel owngraded Lululemon from Buy to Neutral and raised the price target from $140 to $157.

The Thesis

Ulta and Lululemon are two of the best stories in retail, but their share prices reflect it, Siegel said in a Tuesday note.

“We continue to favor both business models and expect absolute and relative fundamental outperformance, but from a stock perspective believe upside is capped," the analyst said. 


Nomura expects Ulta to continue to post among the best comps in retail, but after recovering 60 percent against its 52-week low, its valuation now reflects that projection, Siegel said. 

“Absent the introduction of an international story, at $7 billion in revenue, conversations around addressable market size should be considered." 

All checks suggest strong trends, Siegel said, and he is not calling for a quarterly miss. With shares meaningfully up, “we choose to step to the sidelines at present given what we view as a shift in risk-reward," he said. 


A similar story is found at Lululemon, where ongoing strength and positive current checks are reflected in a recent 94-percent share price rally against its 52-week low, Siegel said. 

“LULU’s comps have been industry-leading, with channel checks leading us to believe the trend will likely continue, and we expect the company to successfully lap the string of difficult compares ahead, albeit at declining rates," the analyst said. 

Nomura has every expectation that Lululemon will lift its $4-billion revenue target, but this is now a consensus belief that's baked into the share price, Siegel said. 

“Further, we remain of the view that, without wholesale exposure, North American DTC-only brands ultimately cap at $3 billion in sales, the very value baked into LULU’s guidance. As such, although we see impressive whitespace for further international growth above and beyond the implied $1 billion in guidance, we would view any increased internal North American expectations with caution." 

Price Action:

Lululemon shares were up 0.68 percent at $148.58 at the time of publication Wednesday, while Ulta was 0.29-percent higher at $305.54.

Related Links:

Piper Jaffray Upgrades Ulta; Survey Reveals Teens Spending More On Cosmetics

Guggenheim Survey Of Ulta Consumers Paints Bullish Picture

Photo by Michael Rivera/Wikimedia. 

Latest Ratings for LULU

Sep 2019Initiates Coverage OnOverweight
Sep 2019MaintainsOutperform
Sep 2019ReiteratesBuy

View More Analyst Ratings for LULU
View the Latest Analyst Ratings

Posted-In: Apparel Nomura retailAnalyst Color News Downgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (LULU + ULTA)

View Comments and Join the Discussion!

Latest Ratings

YEXTMorgan StanleyMaintains15.0
WKMorgan StanleyMaintains42.0
RAMPMorgan StanleyMaintains58.0
PDMorgan StanleyMaintains34.0
HTHTDaiwa CapitalDowngrades
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
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.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
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

Moody's: Leveraged Loan Market Creating Risks For US Banks

LogiMAT 2019: e-Commerce Logistics Needs To Adapt To The Demand Of The Future