By Senad Karaahmetovic
Wells Fargo analysts reiterated an Overweight rating and a $380 per share price target on Lululemon Athletica Inc (NASDAQ:LULU).
They argue that there is “too much negativity priced in today despite regional support to an on-algo FY in 2023 (sales and margins), imminent inventory fixes, and margin tailwinds.”
As such, they see a buying opportunity in LULU stock ahead of the earnings report, which is due for release on March 28 after market close.
“With sentiment the lowest seen in 5+ years, we identify key indicators we're watching for when LULU reports 4Q EPS. We remain confident in our bullish call on: 1) their ability to drive an on-algo FY (esp with China and reasonable NA assumptions), 2) improving inv-to-sales dynamics (inc improved recent checks) and 3) margin drivers (freight/markdowns) supporting GM expansion,” they wrote in a note.
On the valuation front, the analysts believe the stock is “cheap.”
“The stock is cheap today (trading near 2017 lows), something we are not seeing in other high-quality names under coverages (ULTA, TJX, ROST, BURL, NKE)—which are all essentially trading at premiums to multiyear average multiples,” they added.
Lululemon shares are trading about 3.5% higher today.