Lululemon is a compelling opportunity after retail sell-off - Morgan Stanley
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Morgan Stanley upgraded Lululemon (NASDAQ:LULU) to an Overweight rating from Neutral on what the firm calls a compelling opportunity to buy a compounding retail growth story at a discounted valuation compared to history marks.
Analyst Kimberly Greenberger said the firm has long been structurally bullish on the LULU business and has been looking for valuation pullbacks as potential opportunities to become more constructive. With shares down more than 40% YTD, the current level is seen as an attractive entry point for long-term-oriented investors.
"LULU is a LT topline grower, supported by compelling secular tailwinds (e.g., performance/athleisure focus), a market share gain opportunity, & credible future revenue drivers (e.g., international expansion, digital growth, & product innovation/expansion into new categories)."
LULU is also noted to have best-in-class EBIT margin, supported by high average selling prices, with room for modest expansion long term. 
Lululemon (LULU) is expected to continue to be a pandemic beneficiary after COVID accelerated consumers' health & wellness focus and fashion casualization.
Morgan Stanley assigned a price target of $303 to LULU.
Lululemon (LULU) is due to report earnings on June 2.
See the earnings estimates for LULU looking forward.