Lululemon Analysts Bullish After Q3 Print Amid High Expectations

Lululemon Athletica Inc LULU shares are trading down sharply despite the retailer's third-quarter earnings and sales beat on Wednesday. Here's what Wall Street analysts have to say.

Piper Jaffray: Lululemon Loyalty Program Shows Promise

Analyst Erinn Murphy remains bullish on Lululemon and said she continues to see multiple catalysts driving material upside to Wall Street estimates over the near-term. 

“We continue to see multiple drivers of upward revisions looking forward including category expansion, men’s growth (planned to double by FY23), China rollout, digital sales mix and loyalty program,” the analyst said in a Wednesday note. 

Lululemon’s new loyalty program has the potential to drive over $1 in EPS over time, she said. 

Piper Jaffray maintained an Overweight rating and raised the price target from $244 to $245.

KeyBanc: Lululemon's Brand Strength Remains Intact

Lululemon’s third-quarter performance highlights the strength of the brand and its product, KeyBanc Capital Markets analyst Edward Yruma said in a Wednesday note. 

“The company remains on track to achieve its 5-year plan by 2023, as international strength continues. China e-commerce grew over 60% in 3Q and reported record sales on Singles Day and realized full-price sell-through,” the analyst said. 

The athleisure brand continues to expand its bra category and push into further offerings, initiatives Yruma said will take share from traditional retailers like L Brands Inc LB’s Victoria Secret.

KeyBanc maintained a Sector Weight rating on Lululemon. 

Raymond James: Upside Persists For Lululemon 

Significant upside remains for Lululemon’s stock, Raymond James analyst Matthew McClintock said in a Wednesday note, adding that he views the stock drop as a buying opportunity.

“While shares traded down after the market close, we believe this represents an attractive opportunity for investors to buy the dip as the fundamental story remains unchanged and the company is perfectly positioned to capture more than its fair share of heightened levels of growth across the global athletic apparel industry.”

Raymond James maintained a Strong Buy on the company with a $275 price target.

MKM: Lululemon's Q4 Guidance Conservative 

MKM Partners has ongoing conviction that Lululemon can continue its momentum, analyst Roxanne Meyer said in a Thursday note. 

“The strength of product margins on top of sizable gains should quash concerns regarding markdown levels, and gives us confidence that ongoing gross margin opportunity exists through scale and efficiencies,” the analyst said. 

Although Lululemon issued relatively weak fourth-quarter guidance, Meyer said she views the estimates as conservative.

“We believe quarter-to-date comps, which were said to reflect ongoing momentum, may be trending in line with or even above 3Q, and could translate into comp upside opportunity.”

MKM maintained a Buy rating and raised its price target from $255 to $258.

RBC: Buy Lululemon On Any Weakness

RBC Capital Markets analyst Kate Fitzsimons was also unfazed by recent investor concerns surrounding Lululemon after a less-than-stellar quarter.

Lululemon can continue to see comp and EPS upside heading into the fourth quarter and 2020, “and slight multiple expansion as the brand leverages its innovation and customer engagement focuses,” the analyst said. 

RBC would buy the stock on any short-term weakness in light of Lululemon's "open-ended" growth story, she said. 

Fitzsimons maintained an Outperform rating with a $250 price target.

Oppenheimer: Lululemon Faces Risk To Multiple 

In an interview with CNBC, Oppenheimer analyst Brian Nagel said he continues to like Lululemon, but said the stock’s trajectory will be less linear moving forward due to tougher comparisons.

“Lululemon is fundamentally performing extraordinary well,” the analyst said. 

“But the risk to this stock is not just the move up it's having, but the multiple to which it trades, if anything were to crack, then the multiple could come under pressure." 

Oppenheimer maintained an Outperform rating with a $260 price target.

Price Action 

Lululemon shares were down 3.97% at $223.93 at the time of publication Thursday. 

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