Lululemon (LULU) Earnings Turnaround Likely Underway - Credit Suisse

August 29, 2016 8:19 AM EDT
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Price: $58.21 +1.73%

Rating Summary:
    23 Buy, 12 Hold, 8 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 30 | Down: 48 | New: 20
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Credit Suisse analyst C. Buss reiterated an Outperform rating and $76 price target on Lululemon Athletica Inc. (NASDAQ: LULU), saying their proprietary pricing and inventory analysis suggests lululemon's long-awaited earnings turnaround is likely underway, driven by a best-in-class pricing strategy, normalized inventory levels, and supply-chain driven margin expansion.

That said, with the stock up 80% from trough levels in November, versus the S&P 500 up 6%, and shares now trading at 30x P/E, the likelihood of a multi-year merchandise margin expansion phase now seems well-embedded in expectations.

Buss said this means top-line trends must maintain the momentum seen year-to-date in order to deliver earnings upside, which we see as the most likely catalyst for further upside to shares.

For an analyst ratings summary and ratings history on Lululemon Athletica Inc. click here. For more ratings news on Lululemon Athletica Inc. click here.

Shares of Lululemon Athletica Inc. closed at $78.19 yesterday.

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