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LULU Faces Wall Street Pessimism after Issuing Weak Guidance

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Dec. 4 2020, Updated 10:53 a.m. ET

Wall Street reacts to Lululemon’s 4Q16 results

As we’ve learned, Lululemon Athletica (LULU) reported mixed 4Q16 results on March 29, 2017. The company also warned of a slowdown in its sales comps for the next quarter and issued weak earnings guidance for the coming year.

As a result, a host of brokerage companies reacted with outlook revisions and rating downgrades.

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A look at the downgrades

Citi analyst Paul Lejuez cut Lululemon to a “neutral” from a “buy” rating, saying, “The path to long-term growth is not as visible against the backdrop of the current weakness.”

Wells Fargo analyst Ike Boruchow, who downgraded Lululemon to a “market perform” from an “outperform,” said, “In what should have been a fairly tame print from Lululemon (holiday sales [were] already pre-announced), their fourth-quarter results uncovered several issues that are likely to create an overhang on the stock for the foreseeable future.”

Susquehanna cut LULU’s rating to a “neutral” from a “positive,” saying that it would “step to the sidelines until visibility improves.” The brokerage house slashed its price target for LULU to $57 from $82.

Bank of America Merrill Lynch also cut LULU to an “underperform” from a “neutral” rating.

All others lowered their price targets

Deutsche Bank, Cowen, JPMorgan Chase, Telsey Advisory, Jefferies, RBC Capital, and Mizuho also cut their price targets on LULU while reaffirming their ratings.

RBC Capital Markets analyst Brian Tunick, who lowered the stock’s price target from $80 to $60, wrote in a research note, “While disappointing, we’re comforted that the miss was partly self-inflicted.” 

Tunick reaffirmed an “outperform” rating, saying, “Quality of sales continues, inventory is controlled. . .and efforts are underway to address product/traffic issues.”

The average price target for the retailer is $62.80, indicating a potential rise of 21% over the next 12 months.

ETF investors seeking to add exposure to LULU can consider the First Trust Consumer Discretionary Alpha DEX ETF (FXD), which invests 0.22% of its portfolio in the stock.

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