Analyst Starts LULU Stock at Overweight

Lululemon Athletica stock has added over 55% in 2019

Managing Editor
Sep 23, 2019 at 9:17 AM
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Shares of Lululemon Athletica Inc. (NASDAQ:LULU) are inching their way higher this morning, up 0.2% at $189.75 in electronic trading. Behind the positive shift is a bull note out of Piper Jaffray in which the firm initiated coverage with an "overweight" rating and $227 price target, implying expected upside of 20% to Friday's close.

In a note to clients, the brokerage firm cited "better-than-expected performance in China" and "improving profitability in Europe" as among the positive catalysts behind its bullish thesis on Lululemon. Overall, the analyst outlook on LULU has been positive, with 14 of 23 firms sporting a "buy" or better rating coming into today. 

On the charts, the athletic wear name has been on a long-term climb higher. In fact, earlier this month, LULU saw a post-earnings surge to a fresh record intraday high of $204.44. Acting as support since early August has been the 80-day moving average -- a surefire contributor to the stock's now 55.7% year-to-date lead.

Calls have been a popular pick among Lululemon stock options traders in recent weeks. This is per the equity's 10-day call/put volume ratio of 1.74 across the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio ranks in the 91st percentile of its annual range, indicating calls have been bought to open over puts at a faster-than-usual clip.

Lastly, in the wake of that big earnings gap earlier this month, short-term volatility expectations are looking modest. The stock's Schaeffer's Volatility Index (SVI) of 27% arrives in the tame 8th percentile of its annual range, indicating that near-term LULU options premiums are pricing in unusually low volatility expectations at the moment.

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