Lululemon Gets Rare Downgrade Ahead of Earnings

Wedbush downgraded Lululemon Athletica inc. (NASDAQ:LULU) to "neutral" from "outperform," and cut its price target to $155 from $176 -- a slim 4% premium to last night's close. The analyst in coverage said proprietary data sparked margin concerns, and noted the potential for tame guidance following a volatile February for retail.

This bear note comes ahead of Lululemon Athletica earnings, which are due after the market closes next Wednesday, March 27. The majority of the 26 analysts covering LULU stock still maintain a "buy" or better rating, while the average 12-month price target of $162.21 sits just below the security's Oct. 1 record high of $164.79.

LULU options traders are upbeat ahead of earnings, too. The April 150 call is home to peak open interest, and data from Trade-Alert points to mostly buy-to-open activity here. If this is the case, call buyers expect the retail stock to break out above $150 by the close on Thursday, April 18 -- when the front-month options expire.

Looking at the charts, LULU shares bounced from the $112 region in late December -- an area that coincides with the stock's early June post-earnings bull gap -- and have since added more than 34%. Today, the equity is testing support in the $144-$146 region, home to its early November highs, last see down 1.7% at $145.25, following a negative earnings reaction for Nike (NKE).