LuluLemon stock is still a buy, this analyst says

There have been missteps, but BTIG analyst Janine Stichter still believes in Lululemon Athletica (Lululemon Athletica Stock Quote, Chart, News, Analysts, Financials NASDAQ:LULU).

On August 29, after the market close, LULU will report its Q2 results. The analyst says

“While investors breathed a sigh of relief after the slightly better than expected Q1 report, sentiment has moved increasingly negative in the two months since (1) given continued softness in the data (corroborated by our own data, which shows some slowing in Q2 vs. Q1, and softer exit rates in July); (2), the pause in Breezethrough leggings sales, which precipitated concerns around not just the direct financial impact, but also around the depth of internal design challenges and how much this impacts the innovation embedded in the H2 guide; (3) concerns around macro weakness in China, a key growth driver,” she wrote. “Overall, with concerns seemingly at all-time highs (as reflected in a P/E multiple that has been cut in half since the start of the year and well-below peers), we believe expectations are low as investors brace for a lowering of the guide well-below consensus.”

As reported by the Globe and Mail, Stichter August 21 maintained her “Buy” rating and price target of (US) $360 on LULU.

“Despite recent noise, LULU remains one of the most consistent growth stories in retail,” the analyst argued. “Backed by a strong brand, the company has proven its ability to weather various macro, fashion, and competitive cycles,” she said. “While we are not making a call on the timing of a near-term U.S. re-acceleration, our rating reflects our view that the recent U.S. weakness is more a function of execution and some macro choppiness than the sudden onset of competition, and the U.S. will ultimately resume double-digits growth. Further, we note the risk the U.S. stays muted for longer is well understood and factored into buyside estimates, all while international growth provides a buffer. Shares now trade at recent trough levels and below growth peers, suggesting weakness is being viewed as more structural than temporary. We see an asymmetric risk/reward for a quality growth company with a consistent track record and remaining secular tailwinds.”