On Wednesday, BTIG reinitiated coverage on lululemon athletica (NASDAQ:LULU) with a Buy rating and a price target of $425. The firm's stance comes as it views the recent pullback in Lululemon's stock as an opportunity for investors to engage with a consistent growth story in the retail sector.
The pullback provides an "attractive entry for [a] quality growth story," stated BTIG analysts.
The firm said that despite recent market concerns, Lululemon has maintained its position as a strong growth entity within retail, demonstrating resilience through various economic, fashion, and competitive cycles. The analysis suggests that the recent weakness in the United States market is attributed to execution challenges and macroeconomic fluctuations rather than new competition, anticipating that the company will eventually return to double-digit growth rates.
BTIG points out that the potential prolonged weakness in the U.S. market is already anticipated and reflected in investor estimates. Meanwhile, Lululemon's international expansion is expected to serve as a counterbalance.
The company's shares are currently trading at what is perceived to be trough levels, which are lower than those of its growth-oriented peers. This valuation indicates that the market may be overestimating the structural nature of the company's challenges.
The investment firm highlights that Lululemon's risk/reward profile is asymmetric for a high-quality growth company with a strong track record and ongoing secular tailwinds. By reinstating coverage with a Buy rating and a $425 price target, BTIG signals its confidence in the brand's ability to overcome temporary headwinds and continue its growth trajectory.