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Wells Fargo Upgraded Lululemon’s Rating to “Outperform”

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Jan. 12 2016, Updated 4:46 p.m. ET

Lululemon’s price movement

After Wells Fargo upgraded its stock from “market perform” to “outperform,” Lululemon Athletica (LULU) rose by 6.5% to close at $55.86 per share as of January 4, 2016. The stock’s price movements on a weekly, monthly, and year-to-date (or YTD) basis are 2.7%, 3.4%, and 2.7%, respectively.

Currently, LULU is trading 5.0% above its 20-day moving average, 7.3% above its 50-day moving average, and 8.3% below its 200-day moving average.

The Vanguard Mid-Cap Growth ETF (VOT) invests 0.38% of its holdings in Lululemon Athletica. The ETF tracks a market-cap–weighted index of mid-cap growth companies selected by the CRSP (Center for Research in Security Prices).

The Schwab US Mid-Cap ETF (SCHM) invests 0.28% of its holdings in Lululemon Athletica. The ETF tracks a market-cap–weighted index of mid-cap stocks in the Dow Jones US Total Stock Market Index.

Lululemon Athletica’s competitors and their market capitalizations are below:

  • Nike (NKE) — $100.3 billion
  • The Gap (GPS) — $9.2 billion
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Wells Fargo upgrades Lululemon’s rating

Wells Fargo upgraded Lululemon Athletica to an “outperform” rating from a “market perform” rating and gave it a price target of $65.0 per share. Jefferies also upgraded the stock from a “hold” to a “buy” and gave it a price target of $70.0 per share.

Performance of Lululemon in fiscal 3Q15

Lululemon reported fiscal 3Q15 net revenue of $479.7 million, a rise of 14.4% when compared to $419.4 million in fiscal 3Q14. Its net income and EPS (earnings per share) fell to $53.2 million and $0.38, respectively, in fiscal 3Q15, compared to $60.5 million and $0.42, respectively, in fiscal 3Q14.

Projection 

LULU has made the following projections for fiscal 4Q15 and fiscal 2015:

Fiscal 4Q15:

  • Net revenue in the range of $670–$685 million
  • Diluted EPS in the range of $0.75–$0.78

Fiscal 2015:

  • Net revenue in the range of $2.03–$2.04 billion
  • Diluted EPS in the range of $1.81–$1.84

Lululemon Athletica’s PE (price-to-earnings) and PBV (price-to-book value) ratios are 29.5x and 7.1x, respectively, as of January 8, 2016.

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