Options Bulls Brush Off Lululemon Stock Downgrade

Deutsche Bank raised its price objective to $500, however

Digital Content Manager
Dec 4, 2023 at 10:37 AM
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Wells Fargo slashed its rating of Lululemon Athletica Inc (NASDAQ:LULU) to "equal weight" from "overweight" this morning, while Deutsche Bank raised its price objective to $500 from $479. The former noted driving factors behind the retailer's outperformance -- including improving inventories, China growth, and recovering margins -- have played out, and added the stock's valuation is no longer attractive. 

Overall analyst sentiment towards the equity leans bullish. Coming into today, 22 of the 26 firms in coverage sported a "buy" or better rating. Meanwhile, short interest rose 110.5% in the last two reporting periods, and the 5.74 million shares sold short now account for 5% of the security's available float.

At last check, LULU is down 1.6% at $459.05, but hit a two-year high of $467.63 in the previous session. The 20-day moving average has been guiding shares higher since mid-October, and contained a couple pullbacks along the way. For 2023, LULU is up over 43%.

Options bulls are taking today's downgrade with a grain of salt. In fact, 6,866 calls have already crossed the tape, which is triple the intraday average amount, compared to 3,907 puts. Most popular is the January 2024 410-strike put, where positions are being opened.

 

 

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