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Analyst: Lululemon Could Have a 26% Upside

By Rhian Hunt – Updated Oct 26, 2020 at 8:03AM

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A major investment bank thinks the clothing company has growth opportunities galore.

While its share value has nosed down slightly today, lululemon athletica (LULU -0.67%) got a longer-term thumbs-up from a J.P. Morgan analyst on Monday in the form of a price target predicting a nearly 26% upside for the stock. As reported by The Street, the bank continues to rate Lululemon as overweight, while hiking its price target to $415, one of the most optimistic figures currently assigned to the apparel company by Wall Street analysts.

While the outlook on the athleisure clothing seller is generally bullish, J.P. Morgan's Matthew Boss sees a market landscape loaded with opportunities for Lululemon's expansion. Some of the areas where he believes Lululemon can achieve its growth to a brand worth over $5 billion include rapid acceleration of menswear sales, energetic e-commerce expansion, the potential for more personal-care products, and "significant untapped International presence."

A woman wearing casual athletic clothing practicing yoga at home, with a pet dog sitting nearby.

Image source: Getty Images.

Boss also quotes specific metrics supporting his positive case. These include Lululemon's revenue growth topping the company's guidance with a recent 12.4% jump, along with selling, general, and administrative expenses ratcheting upward 24%. He also highlighted "mid-September top-line acceleration (with momentum sustained in October)."

While Lululemon currently holds a commanding position in the casual athletic market, it may have a significant challenger by next March. By that point, Kohl's (KSS 2.68%) plans to have its upscale FLX private label brand rolled out to store shelves, looking to win a piece of the athleisure pie. Other competitors are also emerging rapidly, with Lululemon banking on branching out not only to new product lines but also personal fitness.

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool recommends Lululemon Athletica. The Motley Fool has a disclosure policy.

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