Wells Fargo Downgraded Lululemon, Most Analysts Are Bullish


Jun. 2 2020, Published 12:08 p.m. ET

Today, Wells Fargo downgraded Lululemon Athletica (NASDAQ:LULU) from “overweight” to “equal weight,” as reported CNBC. However, Wells Fargo raised its target price from $250 to $275. The investment firm stated that the strong surge in Lululemon’s stock price from its March lows has lowered the risk-reward ratio. The new target price represents a potential fall of 10.9% from its closing price on June 1.

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Lululemon’s stock performance

Due to the outbreak of COVID-19, Lulumen had to temporarily close its stores in North America, Europe, Malaysia, New Zealand, and China. Closed stores and weakness in the broader equity markets led Lululemon stock to fall to a low of $128.85 on March 18. Since then, the company has made a significant recovery by rising 139.6%. Although the company closed its stores, it still operated its e-commerce business. On May 21, Lululemon reopened 150 stores globally. Also, the company will reopen 200 more stores in the next two weeks. The company’s stock price rose due to the expectation of growth in the e-commerce business, reopening of stores, strong fourth-quarter earnings, and a recovery in the broader equity markets.

Today, Lululemon was trading 1.2% lower at 11:23 AM ET. Wells Fargo’s downgrade dragged the stock down. Meanwhile, Lululemon has returned 33.2% this year as of June 1. The company has outperformed the broader equity markets and its peers. During the same period, the S&P 500 Index has declined by 5.4%. Meanwhile, NIKE (NYSE:NKE), Under Armour (NYSE:UAA), and Columbia Sportswear (NASDAQ:COLM) have all fallen by 1.7%, 57.1%, and 25.0%, respectively. Let’s look at other analysts’ recommendation for the stock.

Other analysts’ recommendations

Most of the analysts are still bullish on Lululemon. Today, Bank of America raised its target price from $230 to $340. On Monday, Cowen reiterated its “outperform” rating and raised its target price from $280 to $311. Meanwhile, Raymond James, Piper Sandler, and JPMorgan Chase raised their target prices in May. As of June 2, analysts’ consensus target price was $241.20. The target price represents a fall of 21.9% from its closing price on June 1. Wall Street favors a “buy” rating for the stock. Among the 32 analysts, 64.7% recommend a “buy,” while 35.3% recommend a “hold.” None of the analysts recommend a “sell.” Lululemon will likely report its first-quarter earnings on June 11. Stay tuned for our earnings preview.


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