Why This Lululemon Athletica Analyst Cuts Rating Ahead Of Q3 Print

Lululemon Athletica Inc (NASDAQ: LULU) shares made big moves last week and remained on an upward trajectory in early trading on Tuesday, ahead of its third-quarter earnings call that is scheduled for Dec. 7.

Although the company may report a revenue beat for the third quarter, the stock already reflected this upside following the recent rally, according to Raymond James.

The Lululemon Athletica Analyst: Rick Patel downgraded the rating for Lululemon Athletica from Strong Buy to Outperform, while raising the price target from $440 to $495.

The Lululemon Athletica Thesis: The company was likely to report 17% revenue growth “on demand from new innovation, new stores, and growing brand awareness & affinity,” Patel said in the downgrade note.

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“We see op. margins lower y/y as higher investment spend more than offsets higher GM % from lower freight,” the analyst wrote.

Lululemon Athletica may report its third-quarter earnings and revenues higher than the Street estimates, as it has delivered a revenue beat in 12 of the last 13 quarters and an EPS beat in all 13 quarters, he added.

“For F4Q, we model slower growth, in line w/ implied guide; competitor promos have also been elevated, in our view,” Patel further stated.

LULU Price Action: Shares of Lululemon Athletica are down 0.55% to $458.24 at the time of publication on Tuesday.

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