Lululemon bulls pound the table on long-term upside
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Lululemon (NASDAQ:LULU) is being defended by bulls up and down Wall Street for a quarter that they think showed off underlying strength against the tough macroeconomic backdrop.
Oppenheimer said its initial review of recent trends at LULU and commentary from the organization's senior leadership left it impressed with the athletic apparel giant's ability to effectively manage a challenging and fluid consumer backdrop in the U.S. and across the globe. Analyst Brian Nagel said the post-earnings decline weakness is at odds with continued solid fundamentals at the company.
"In our view, it is becoming increasingly clear that LULU's powerful digitally-enabled infrastructure and superior merchandising are allowing it to capture even greater share, particularly as lesser companies falter," noted Nagel. 
Oppenheimer is upbeat upon prospects for athleisure and views LULU as a top pick within the space.
Morgan Stanley was also positive on the report. While LULUâs inventory growth is likely to have disappointed those who were expecting sequential improvement, the firm said fundamentals continue to be strong and the company's ability to drive exceptional demand against a challenged consumer macro backdrop remains impressive. Of note, Morgan Stanley analyst Alex Straton thinks raised full-year guidance appears conservative in light of historical & QTD trends, which leaves room for an additional raise at the ICR conference in January. Straton and team kept an Overweight rating on LULU and hiked its price target to $387.
Bank of America reiterated a Buy rating on LULU following the strong Q3 revenue beat in 3Q and encouraging read on holiday sales, which included the best Black Friday in company history.
"We remain comfortable with LULUâs elevated inventory (+85% y/y) and expect markdowns will remain well controlled due to the high core mix (45%), robust demand trends, and seasonally fresh product assortment," updated analyst Lorraine Hutchinson.
Shares of Lululemon (LULU) fell 6.25% in premarket action on Friday.
Dig into the LULU earnings call transcript.