Analyst: Lululemon Athletica Stock Could Outperform

The equity has shed 23% in the last 12 months

Deputy Editor
Oct 11, 2022 at 9:49 AM
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Apparel retailer Lululemon Athletica Inc (NASDAQ:LULU) is up 1.8% at $295 in this morning following a bull note from Piper Sandler. The analyst upgraded LULU to "overweight" from "neutral" and hiked its price target by $30 to $350, citing its recent "Taking Stock With Teens survey" that showed Lululemon surpassed Nike (NKE) as the most favored athletic apparel brand among females. Piper Sandler also noted the potential for outperformance in outerwear ahead of what's expected to be a colder winter.

On the charts, a mid-September rally that followed the company's most recent earnings report  was cut short by the 260-day moving average. Longer-term, LULU has turned in just two positive monthly performances over the last 11, and now sports a 23.8% year-over-year deficit.

The brokerage bunch is mostly bullish towards the equity, though there's some room for pessimism to unwind. Of the 20 analysts in coverage, seven called the equity a "hold" or worse heading into today. Meanwhile, the 12-month consensus target price of $385.59 is a 30% premium to current levels.

A sentiment shift in the options pits could fuel additional tailwinds for the equity. This is per LULU's 50-day put/call volume ratio of 1.07 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits in the 88th percentile of its annual range. In other words, long puts are getting picked up at a quicker-than-usual pace.

Options look like a an ideal way to speculate on the equity's next move. This is per  LULU's Schaeffer's Volatility Scorecard (SVS) of 96 out of 100, which indicates the stock has consistently realized bigger returns than options traders have priced in the past 12 months.



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