Lululemon Athletica Inc (NASDAQ:LULU) was featured as the call of the day Monday on CNBC’s “Fast Money Halftime Report.”
What Happened: Jefferies analyst Randal Konik downgraded Lululemon from Hold to Underperform and lowered the price target to $200 from $375, citing pull-forward concerns from the pandemic.
Konik said growth demand for Lululemon is already as good as it gets. With Nike Inc (NYSE:NKE) shares down more than 35% year-to-date, the Jefferies analyst prefers the swoosh over Lululemon stock.
Why It Matters: Virtus Investment Partners’ Joe Terranova disagreed with just about everything in the analyst note. He highlighted one point that really set him off.
“I read the whole report. 40% of people gained weight? That’s a reason to take the price down to $200? I don’t think so. I mean I completely disagree with the report,” Terranova said.
He told CNBC that he owns Lululemon stock as a way to get exposure to growth in the consumer discretionary space. At the beginning of June, the company reported 32% revenue growth year-over-year, according to data from Benzinga Pro.
“Lululemon is an idiosyncratic growth story. It’s being catalyzed by innovation. This is the actual one name … that’s defying the deceleration we’re seeing in terms of comps,” Terranova said.
Lululemon said comparable sales increased 28% year-over-year in the first-quarter of fiscal 2022. If you want exposure to growth in the consumer discretionary space, Lululemon is the best option, Terranova added.
“I’m targeting LULU and I disagree that Nike is the one, on a valuation basis, to own over LULU because LULU has come down enough that it trades at a slight premium to Nike,” he said.
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LULU Price Action: Lululemon has a 52-week high of $485.82 and a 52-week low of $251.51.
The stock was down 3.86% at $282.07 Monday afternoon.
Photo: m01229 from Flickr.
