Wells Fargo Downgrades Lululemon Despite Year-to-Date Rally

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Lululemon Athletica ($NASDAQ:LULU) Inc., better known simply as Lululemon, is a Canadian athletic apparel company based in Vancouver, British Columbia. The company specializes in providing high-end fitness clothing for both men and women. Despite its strong performance this year to date, Wells Fargo has recently downgraded Lululemon’s stock from ‘outperform’ to ‘market perform.’ The downgrade itself was based on the belief that the stock had already achieved a level of appreciation that reflected the company’s potential for growth.

The analysts at Wells Fargo evaluated the stock’s potential to reach a new all-time high was low, with the current market conditions creating a ceiling for the price. The downgrade has certainly put a dent in Lululemon’s strong performance this year, however, it still appears to be a healthy company. It is likely that the stock will remain in a comfortable trading range for the foreseeable future, as it has already been on an upswing over the past few months.

Share Price

On Monday, LULULEMON ATHLETICA stock opened at $459.2 and closed at $460.8, down by 1.3% from its last closing price of 466.6. Wells Fargo analysts responded to this slight dip by downgrading the stock from ‘outperform’ to ‘market perform’. Despite this downgrade, analysts remain largely positive about the stock’s potential for the long term. Live Quote…

About the Company

Income Snapshot

Below shows the total revenue, net income and net margin for Lululemon Athletica. More…

Cash Flow Snapshot

Below shows the cash from operations, investing and financing for Lululemon Athletica. More…

Balance Sheet Snapshot

Below shows the total assets, liabilities and book value per share for Lululemon Athletica. More…

Key Ratios Snapshot

Some of the financial key ratios for Lululemon Athletica are shown below. More…

Analysis

At GoodWhale, we recently conducted an extensive analysis of LULULEMON ATHLETICA‘s wellbeing. Our Star Chart analysis revealed that LULULEMON ATHLETICA is strong in terms of asset, growth, and profitability, yet slightly weaker in terms of dividend. Moreover, when it comes to the company’s cashflows and debt, LULULEMON ATHLETICA received a high health score of 10/10, indicating that the company is capable of safely riding out any crisis without the risk of bankruptcy. Based on our analysis, we classified LULULEMON ATHLETICA as a ‘gorilla’, which is a type of company that we conclude has achieved stable and high revenue or earning growth due to possessing a strong competitive advantage. Investors interested in such a company may include value investors looking for long-term capital appreciation, or growth investors looking for a reliable dividend income. More…

Peers

Lululemon Athletica Inc is a yoga-inspired, technical athletic apparel company for women. The company operates in the United States, Canada, and Australia. Lululemon Athletica Inc’s main competitors are Buckle Inc, Citi Trends Inc, and Tilly’s Inc.

– Buckle Inc ($NYSE:BKE)

Buckle Inc is a leading retailer of casual apparel, footwear, and accessories for young men and women in the United States. As of 2022, the company has a market capitalization of 1.77 billion dollars and a return on equity of 55.65%. Buckle Inc operates over 450 stores in 44 states across the country, and offers its products through its website and catalog. The company’s mission is to provide great fashion at a great value for its customers.

– Citi Trends Inc ($NASDAQ:CTRN)

Citi Trends Inc is a value-priced retailer of urban fashion apparel, accessories and home décor. The company operates over 600 stores in 31 states. Citi Trends’ mission is to be the largest and most convenient source of trend-right fashion at the right price for our target demographic of urban youth.

– Tilly’s Inc ($NYSE:TLYS)

Tilly’s Inc is a company that operates in the retail industry. The company has a market cap of 239.38M as of 2022 and a return on equity of 19.35%. The company operates through two segments: stores and e-commerce. The company offers a variety of products including apparel, footwear, and accessories for men, women, and children. The company operates stores in California, Arizona, Nevada, and Texas.

Summary

Wells Fargo recently downgraded Lululemon Athletica‘s share rating from “Outperform” to “Market Perform”, citing a strong year-to-date price rally as the main reason for the downgrade. Despite the downgrade, analysts remain optimistic about the company’s long-term prospects. Analysts suggest that investors looking to invest in Lululemon should consider buying on dips in the share price, in order to benefit from its long-term growth potential.