We haven’t had many reasons to talk about Lululemon Athletica (LULU) recently. But, given the headline-making drama at the yogawear- and athletic apparel-maker, this period of quiet is probably the cleansing breath the company has hoped for.
Analysts had seemingly unconditional love for Lululemon before its recent troubles, and now that it’s on the upswing–Lululemon’s up 11% during the past three months, even if it’s down 30% on the year–it's no surprise that the love is getting stronger.
BB&T analyst Paul Alexander, for instance, initiated coverage on Lululemon with a Buy rating and $50 price target in a note today. He explains why:
After a challenging year and a half for the company, we think Lululemon is poised to stabilize results. We expect gradual near-term improvement due to new merchandising and design strategies, new traffic-driving initiatives, and better public sentiment toward the brand. lulu’s significant long-term growth potential should also limit downside, creating a positive risk/reward.
Alexander also sees any growling from bears about the company as overblown:
Lululemon still boasts one of the longest and most compelling growth runways in specialty retail. The company can still nearly double U.S. store count, and it is beginning to roll out new stores in Europe and Asia, each of which should add to lulu’s growth potential. A new go-to-market strategy should support margins as the merchandising and design organization and supply chain become more efficient and effective.
It looks like investors agree. Shares of Lululemon have gained 1.6% to $41.52 at 3:25 p.m. this afternoon.
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