Lululemon rallies after Truist upgrade just ahead of analyst event
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Truist Securities upgraded Lululemon Athletica (NASDAQ:LULU) to a Buy rating after having the athletic apparel stock slotted at Hold.
Analyst Beth Reed noted that valuation on LULU has moderated and the firm expects a robust new five-year financial outlook at the analyst day event set for tomorrow.
Reed's bull thesis: "Combined with strong brand health and ongoing innovation, we believe LULU has momentum beyond the pandemic, driven by (1) consumer prioritization of health & wellness, (2) a growing TAM, (3) improved store traffic/inventory levels and (4) modest go-forward EBIT margin expansion. Further, we view LULUâs higher income customer base and pricing power as key assets in an inflationary environment."
Truist assigned a price target of $495 to LULU based off a 2022 EPS estimate of $9.30 and 2023 EPS estimate of $11.00. Those marks are slightly below the consensus estimates, but a high premium for LULU is called justified due to the company's strong positioning, higher income customer base and pricing power, which are said to all line up as particularly valuable attributes in an inflationary environment.
Shares of Lululemon (LULU) rose 2.15% in premarket trading to $395.05.
Lululemon (LULU) is one of the stocks on Seeking Alpha's Catalyst Watch this week.