Argus Upgrades Lululemon On Multiple Growth Levers

Lululemon Athletica inc. LULU got some love from one Wall Street analyst who said the company’s growth outlook is among the best in the entire retail industry.

The Analyst

Argus analyst John Staszak upgraded Lululemon from Hold to Buy and set a $150 price target for the stock.

The Thesis

A massive international growth opportunity and a transition toward higher-margin inline sales is a winning recipe for long-term investors, according to Staszak.

“With substantial opportunities to expand outside of North America, particularly in China, a strong brand and a growing number of e-commerce sales, we think lululemon's growth prospects are among the best in the apparel sector,” he said in the upgrade note.

Lululemon is almost exclusively a North American business with female products. However, expansion overseas and into men’s apparel should help drive revenue growth in the long-term, Staszak said.

He said new CEO Calvin McDonald, who joined the company in July, has a long track record of double-digit organic revenue growth, market share gains and online sales growth during his time at Sephora.

Argus is calling for fiscal 2019 EPS of $3.40, up 80 percent from the earnings it reported just last year. McDonald expects earnings growth to continue into 2020, projecting $3.80 in EPS that year. Looking out further into the future, Argus is modeling 15 percent compound annual EPS growth over the next five years.