Why This Lululemon Athletica Analyst Cuts Rating Ahead Of Q3 Print

Lululemon Athletica Inc LULU shares made big moves last week and remained on an upward trajectory in early trading on Tuesday, ahead of its third-quarter earnings call that is scheduled for Dec. 7.

Although the company may report a revenue beat for the third quarter, the stock already reflected this upside following the recent rally, according to Raymond James.

The Lululemon Athletica Analyst: Rick Patel downgraded the rating for Lululemon Athletica from Strong Buy to Outperform, while raising the price target from $440 to $495.

The Lululemon Athletica Thesis: The company was likely to report 17% revenue growth “on demand from new innovation, new stores, and growing brand awareness & affinity,” Patel said in the downgrade note.

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“We see op. margins lower y/y as higher investment spend more than offsets higher GM % from lower freight,” the analyst wrote.

Lululemon Athletica may report its third-quarter earnings and revenues higher than the Street estimates, as it has delivered a revenue beat in 12 of the last 13 quarters and an EPS beat in all 13 quarters, he added.

“For F4Q, we model slower growth, in line w/ implied guide; competitor promos have also been elevated, in our view,” Patel further stated.

LULU Price Action: Shares of Lululemon Athletica are down 0.55% to $458.24 at the time of publication on Tuesday.

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