Why This Lululemon Athletica Analyst Raises Forecast After Meeting With Management

Lululemon Athletica Inc (NASDAQ: LULU) has been in focus after grabbing the attention of U.S. shoppers during the holiday season.

Although the company’s growth could slow, it remained “one of the most attractive growth stories among global brands,” given the potential to scale the International and Men’s segments with margin expansion, according to Raymond James.

The Lululemon Athletica Analyst: Rick Patel maintained an Outperform rating for Lululemon Athletica while raising the price target from $495 to $520.

The Lululemon Athletica Group Thesis: The meeting with the company revealed revenue growth guidance for the fourth quarter was raised from +13-15% to +14-15% to reflect better-than-expected demand, Patel said in the note.

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Lululemon Athletica expects its gross margins to expand by 120 to 130 basis points, versus its earlier projection of 90 to 120 basis points, due to better-than-expected sales growth, modestly higher-than-expected air freight benefit and lower-than-planned markdowns, the analyst stated.

The company’s competitive promotions continue, but are not “as bad as last year,” Patel wrote. While inventories remain controlled, China continued to be an attractive market, he added.

LULU Price Action: Shares of Lululemon Athletica had declined by 0.30% to $484.23 at the time of publication Wednesday.

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Photo: Courtesy Lululemon Athletica