Wedbush Raises Lululemon (LULU) to Outperform, 'GM Concerns Offset by Lower Bar'

March 31, 2014 7:12 AM EDT
Get Alerts LULU Hot Sheet
Price: $67.32 +0.49%

Rating Summary:
    23 Buy, 13 Hold, 7 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Wedbush upgraded Lululemon Athletica Inc. (NASDAQ: LULU) from Neutral to Outperform with a price target of $64.00 (from $54.00). Analyst Corinna Freedman thinks GM concerns are offset by a lower bar.

"Upgrading to OUTPERFORM - with bad news largely priced into the stock, we believe the shares are poised for a turnaround in sentiment. We are upgrading shares of LULU to OUTPERFORM and raise our target to $64. We previously anticipated becoming more constructive on a reset of earnings expectations to a drastically lowered bar and we found several positive takeaways from recent earnings commentary to support our pivot in outlook. We further believe the near-term set up is positive given upcoming management marketing (which should clear up lingering concerns regarding gross margin guidance,) high short interest, the April Analyst Day and a scarcity of mid-cap Consumer growth stories," said Freedman.

"Comforted by a potential troughing of retail comps, new product initiatives, ivivva and men’s strength, stepped-up international growth and several near-term catalysts support our new view. We anticipate that the shares will benefit from improving weather as store traffic improves from trough levels and that the Analyst Day in mid-April will be catalyst with a focus on new product initiatives. We further anticipate additional capsule product to drive interest post-Analyst Day and anticipate the company’s recently issued guidance of $1.80-1.90 to prove beatable providing confidence in the new CEO’s regime. We maintain our above-guide EPS estimate of $1.92 for FY14 and $2.20 EPS estimate for FY15 (+14% EPS growth.)" she added.

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 $51.89 yesterday.

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