Shares of lululemon athletica (NASDAQ:LULU) were up slightly today after Wedbush gave the stock an outperform rating, up from its previous neutral. On today's Stock of the Day, host Erin Kennedy and Motley Fool analyst Jason Moser discuss lululemon, and why Jason has so far passed over the stock due to valuation.
With the valuation now at a more reasonable level, the company under new leadership, and lululemon's continued brand strength, Jason is beginning to see opportunity here. The stock has been beaten up recently for a number of reasons, including the defective material that caused some of the retailer's yoga pants to be transparent in certain situations, as well as the difficult retail environment over this holiday season that caused many retailers to struggle. Despite these short-term stumbling blocks, Jason still sees a long growth story ahead here.
Still, there will be things to watch for. While the leadership change was a positive, Jason wants to see the company keeping focus on its plan for the future. He'll be looking for the lululemon to build out its product offerings and become more things to more people. If the company can do that, he sees today's price as a fair entry point for a stock that has long been a bit too expensive.
2 stocks changing the retail world
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.
Erin Kennedy has no position in any stocks mentioned. Jason Moser has no position in any stocks mentioned. The Motley Fool recommends Lululemon Athletica. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.