Wells Fargo upgraded Lululemon
Wells Fargo upgraded Lululemon Athletica (LULU) from “market perform” to “outperform” on September 17 due to strong sales momentum. Analyst Ike Boruchow raised the company’s target price to $200 from $144. The current target price reflects an upside of ~30%.
What’s behind the upgrade?
Boruchow thinks that Lululemon Athletica’s momentum is expected to continue into the second half of 2018 and into fiscal 2019.
Lululemon Athletica’s ongoing innovations, product enhancements in women’s pants and shorts, and new fabrication have driven customers to its stores for repeat purchases year after year. Men’s apparel has also outperformed consistently. The company aims to increase its focus on men’s apparel. Lululemon Athletica plans to grow men’s apparel to 35%–40% of sales from the current 22% level. The company is expanding stores and providing men’s apparel more prominent footage.
Boruchow said that Lululemon Athletica’s strong digital sales and strengthening supply chain will likely drive its outperformance in the near future. International markets are also expected to provide the required boost going forward. Currently, international markets account for 10% of the company’s sales.
Lululemon Athletica is covered by 32 analysts. The company is rated a 2.2 with 59% “buy,” 38% “hold,” and 3% “sell” recommendations. The ratings are done on a scale of one (strong buy) to five (sell).
Lululemon Athletica has an average target price of $156.89, which reflects a modest upside of 1%. The company traded at $155.38 on September 17. The company has gained a phenomenal 98% in 2018.