7 Lululemon Analysts On The Q2 Print: 'We See The Pullback As An Opportunity'

Lululemon Athletica Inc LULU reported second-quarter revenue that was up 2%, led by direct-to-consumer sales that rose 155% year-over-year. Here's what the Street had to say.

The Lululemon Analysts: KeyBanc Capital Markets analyst Matthew DeGulis maintains a Sector Weight rating on Lululemon. 

Wells Fargo analyst Ike Boruchow maintains an Equal Weight rating with a $275 price target. 

Wedbush analyst Jen Redding maintains a Neutral rating and lowered the price target from $380 to $340.

Piper Sandler analyst Erinn Murphy maintains an Overweight rating with a $396 price target. 

Raymond James analyst Matthew McClintock maintains a Strong Buy rating while raising the price target from $335 to $400.

Needham analyst Rick Patel maintains a Buy rating with a $430 price target. 

RBC Capital Markets analyst Kate Fitzsimmons maintains an Outperform rating with a $435 price target. 

The Lululemon Bulls: “Great retailer gets bid up pre-earnings, results don’t live up to near-term hype, stock weakness ensues,” RayJay's McClintock said in a note, referring to a similar sequence of events occuring after Lululemon's first-quarter report.  

The company has a bigger focus on opening more seasonal stores and adding virtual queues as methods of addressing guest constraints, the analyst said.

RBC's Fitzsimmons said Lululemon's customer loyalty and more comfortable customer experience seem like an advantage heading into the second half of this year. 

Needham's Patel highlighted an expanded total addressable market, the Mirror acquisition, e-commerce, men’s apparel and international business as reasons to be bullish.

"Globalization remains a key growth driver,” the analyst said. “We see the potential to scale international, men’s, and digital." 

Piper Sandler's Murphy said she was impressed by Lululemon's e-commerce growth, a sequential improvement in men's and international sales growth. 

“We see the pullback in shares as an opportunity to own a best-in-class growth name where back half numbers could prove conservative.”  

Mirror is expected to hit full year revenue of $150 million versus prior guidance of $100 million, said KeyBanc's DeGulis.

Lululemon is expected to roll out Mirror in 10 to 15 stores in the fourth quarter.

“Mirror and Membership represent compelling recurring revenue streams,” DeGulis said.

Wells Fargo, Wedbush Cautious On Lululemon Shares: Wells Fargo's Boruchow called Lululemon’s second quarter “noisy” and said  investors should stay sidelined from this "great company but not great stock."

“The store-level recovery has hit the proverbial wall with comps at open stores running -25%, but not expected to show improvement from that run-rate due to capacity constraints,” the analyst said. 

Elevated inventory was a concern in many of the analyst reports, with second-quarter inventory up 36% year-over-year.

“Inventory levels remain heavy and are likely to remain elevated through year-end, with management noting +20-30% growth in 2H, which is well above planned sales growth,” Boruchow said.

Wedbush's Redding highlighted inventory risks and the uncertainty from COVID-19 as reasons for a lower price target, but said she's “cautiously optimistic on the company’s outlook over the long term.”

LULU Price Action: Shares of Lululemon were down 9.07% at $318.07 at last check Wednesday. 

Shares hit a 52-week high of $399.90 last Wednesday.