‘Long-term Compounder on Sale’: Lululemon Shares Surge on Morgan Stanley Upgrade to Overweight

By Senad Karaahmetovic

Morgan Stanley analyst Kimberly Greenberger upgraded Lululemon Athletica (NASDAQ:) to Overweight from Equal Weight with a $303.00 per share price target, down from $339.00.

The analyst says LULU shares are trading at a discount amid fears of recession and downbeat consumer sentiment.

“Current levels offer an attractive entry point, so we move off the sidelines & recommend long-term oriented investors take another look at this quality asset on sale,” Greenberger told clients in a note.

Risks are priced in, Greenberger added, and the risk is now to the upside as Lululemon’s business could be more resilient through industry/macro headwinds than the market currently discounts.

“LULU could weather industry/macro headwinds more effectively than Softlines peers & what the market is currently discounting.”

On the other hand, UBS analyst Jay Sole sees a balanced upside/downside skew heading into the print for LULU.

“We forecast LULU delivering 1Q22 EPS and FY22 guidance in-line with sell-side consensus EPS estimates. Because of this, we doubt the report causes sell-side EPS estimates to change much. We also believe the market expects this type of report, so we doubt the stock’s P/E moves much over the event,” Sole told clients in a note.

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The UBS analyst expects a “low volatility” event.

Lululemon stock is up almost 8% today.

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