Lululemon added to JPM’s focus list after earnings

JPMorgan added Overweight-rated Lululemon Athletica (NASDAQ:) to its Analyst Focus List (AFL) in a note Thursday following the company’s first quarter beat and raise. They lowered their price target for the stock to $457 from $509 per share.

The bank sees a favorable risk-reward for the stock, saying the brand still has a place domestically, while International is “an untapped opportunity.”

Reacting to the latest earnings release, JPMorgan said the company’s first quarter +10.4% revenue growth translates to a +23.1% CAGR compared to 2019, with continued strength across every single international region.

CEO McDonald cited two company-specific headwinds that weighed on 1Q˖s US +2% revenue growth (vs. 4Q +9%): (1) Women’s, which had too narrow of a color palette (particularly in leggings) in addition to out-of-stocks in smaller sizes, and (2) Bags, which did not have enough inventory depth in newer styles to fully capture demand and offset the headwind cycling the Everywhere Belt Bag,” explained JPMorgan.

“On the other hand, the US Men’s business maintained momentum, driven by strong guest response to innovation across performance, lounge, and the ABC franchise.”

Overall, LULU management cited share gains in both the US Adult Apparel industry and US Adult Activewear industry, with outsized share gains in Men’s and flat market share in Women’s, explained the bank.