Jefferies Notes Q3 Miss From Lululemon Athletica (LULU) Could Result in Free Fall of Price

Jefferies is reaffirming its Hold rating and $59 price target on shares of Lululemon Athletica Inc. (NASDAQ: LULU) ahead of the release of its Q3 earnings on December 1.

The firm notes LULU's risk reward ratio looks good going into the quarterly results as margin upside alone should be enough to drive stronger than expected results. For the third quarter, Jefferies estimates same store sales of 15 percent on $0.25 per share in earnings.

An analyst at Jefferies does highlight, "While unlikely, a miss would empower the bears and draw parallels to recently dislocated high-flying stocks like Green Mountain (Nasdaq: GMCR) and Netflix (Nasdaq: NFLX)."

Canada's macro environment may weigh heavy on the company's margins this quarter as the Canadian dollar continues to trend weaker. LULU's guidance calls for the first operating margin decline in over two years. Jefferies also comments that same store sales will be interesting given rising retail prices and tough comparisons.

For 2011 and 2012, Jefferies forecasts EPS of $1.18 and $1.58. EBITDA for 2011 and 2012 is estimated to be $300 million and $405 million.

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 $48.93 yesterday.

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