Lululemon (LULU): From a Downward Facing Dog to a Warrior Pose
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Price: $121.07 +4.65%
Rating Summary:
13 Buy, 34 Hold, 4 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
13 Buy, 34 Hold, 4 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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When the yoga pants maker Lululemon (Nasdaq: LULU) reported third-quarter results on Thursday, many thought the company was headed into a tailspin. This has all turned around Friday morning, as three Wall Street analysts upgraded the stock to Buy in the last 24 hours.
A top-line miss and a staggering 77 percent rise in inventory were the two main concerns which drove LULU shares down as much a 16 percent in early action Thursday. The stock has now reversed all those losses and then some.
One analyst did a complete 180 on the stock, going from Sell to Buy. That analyst was Edward Yruma at Keybanc.
Yruma was one of the analysts highlighting concerns with the inventory surge. However a meeting with CEO Christine Day and CFO John Currie after the third-quarter earnings call gave him a better outlook and he now views the inventory spike as a positive.
"LULU has been chronically underinventoried," Yruma writes. "As such, we think that better in-stock levels could drive an incremental $0.13 in EPS over the next 12 month."
In addition to better inventories, Yruma sees three incremental sales drivers in 2012. "First, the exceedingly low inventory levels have essentially starved the outlet channel. We think that improved inventory levels can drive improved operating profit at outlets. Second, LULU continues to make significant strides in its men's assortment. Like Coach, we think that this serves as an untapped area of growth. Third, LULU will have incremental SKUs in the bike and commuter focus areas."
He said LULU will continue to aggressively grow the women's, and over time, men's athletic wear market with sustainably high upper 20 percent operating margins. He set a $58 price target on the stock.
To see all the latest analyst action on LULU please visit Ratings Insider.
A top-line miss and a staggering 77 percent rise in inventory were the two main concerns which drove LULU shares down as much a 16 percent in early action Thursday. The stock has now reversed all those losses and then some.
One analyst did a complete 180 on the stock, going from Sell to Buy. That analyst was Edward Yruma at Keybanc.
Yruma was one of the analysts highlighting concerns with the inventory surge. However a meeting with CEO Christine Day and CFO John Currie after the third-quarter earnings call gave him a better outlook and he now views the inventory spike as a positive.
"LULU has been chronically underinventoried," Yruma writes. "As such, we think that better in-stock levels could drive an incremental $0.13 in EPS over the next 12 month."
In addition to better inventories, Yruma sees three incremental sales drivers in 2012. "First, the exceedingly low inventory levels have essentially starved the outlet channel. We think that improved inventory levels can drive improved operating profit at outlets. Second, LULU continues to make significant strides in its men's assortment. Like Coach, we think that this serves as an untapped area of growth. Third, LULU will have incremental SKUs in the bike and commuter focus areas."
He said LULU will continue to aggressively grow the women's, and over time, men's athletic wear market with sustainably high upper 20 percent operating margins. He set a $58 price target on the stock.
To see all the latest analyst action on LULU please visit Ratings Insider.
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