Lululemon Upgraded to Overweight By Morgan Stanley

Lululemon Athletica (NASDAQ: LULU) was just upgraded from an “equal weight” rating to an “overweight” recommendation by stock analysts at Morgan Stanley. Many suspect that with the reduced share price, there may be a recovery on the horizon.

“Current levels offer an attractive entry point, so we move off the sidelines & recommend long-term oriented investors take another look at this quality asset on sale,” Kimberly Greenberger, the Morgan Stanley analyst that made the upgrade, told clients in a note.

According to Greenberg, the risks are priced in and it is beneficial as the company could prove more resilient through the current market conditions.

“LULU could weather industry/macro headwinds more effectively than Softlines peers & what the market is currently discounting.” Greenberg added.

Furthermore, the company previously disclosed that its Board of Directors had authorized a stock repurchase plan, which allows it to buyback USD1 Billion in outstanding shares. The authorization makes it possible for the retailer to re-purchase up to 2.1% of its shares through open market purchases. Shares buyback strategies are typically a signal that a company’s management thinks its stock is undervalued.

In a note to clients, Jay Sole, a UBS analyst said, “We forecast LULU delivering 1Q22 EPS and FY22 guidance in-line with sell-side consensus EPS estimates. We don’t believe the sell-side EPS estimates will change significantly because of this. We also believe the market expects this type of report, so we doubt the stock’s P/E moves much over the event.”