Lululemon Athletica Shares Surge on Positive Outlook

By Anuja Bharat Mistry
(Reuters) – Lululemon Athletica (NASDAQ:LULU) shares jumped about 17% in early trading on Friday as an upbeat annual forecast raised investor optimism for a robust holiday quarter and prompted Wall Street to adopt a more bullish view on the stock.

The athleisure maker has refreshed its clothing line with trendier styles to attract younger shoppers and compete with emerging brands like Vuori and Alo.

Targeted marketing efforts have significantly boosted sales in China, Lululemon's second-largest market, where third-quarter revenue surged nearly 36%.

Analyst Rick Patel from Raymond James remarked, "Despite competitive threats, Lululemon's customers remain loyal."

Following the company's better-than-expected quarterly results posted on Thursday, at least 17 brokerages raised their price targets on the stock. Stifel was the most optimistic among the 36 brokerages covering Lululemon, increasing its target by $68 to $438, well above Wall Street's median estimate of $374.10. The company's shares were trading at $404.64, on track for their best day since June 1, 2018.

Lululemon anticipates strong sales over the critical Thanksgiving weekend, mirroring optimism at specialty retailers such as Victoria's Secret and cosmetics retailer Ulta Beauty (NASDAQ:ULTA), both of which also reported strong results on Thursday and saw shares rise about 7% and 10%, respectively.

Lululemon's forward earnings multiple for the coming 12 months is 23.03, compared to Nike (NYSE:NKE)'s 25.91 and Under Armour (NYSE:UA)'s 27.10.

Despite the surge, Lululemon shares have dropped nearly 33% this year.