Lululemon soars on analyst upgrade
Goldman Sachs thinks the fitness-wear company's revenue has room to grow.
Lululemon jumped more than 8% in afternoon trading Wednesday to top $51.
Goldman named the retailer to its Americas Conviction List, and analyst Michelle Tan placed a six-month price target of $64 on the stock. Tan thinks the company can nearly quadruple its revenue through expansion in North America -- and that doesn't even count overseas growth.
Lululemon already has sky-high annual sales growth of more than 30%. The company "offers one of the most compelling stories in retail, with continuing brand momentum," Tan wrote.
And while it may seem unbelievable that Lululemon's $98 yoga pants are in high demand, that was a problem the company faced last year.
Lululemon wasn't able to produce enough clothes to meet demand, raising investor concerns about its inventory levels. The company had to buy more air freight to supply its stores last spring.
But then a few months passed, and the company was punished for bulking up its inventory too much. Investors were nervous about the dramatic growth in inventory before the fourth quarter, while others said this was a clear bulking up for holiday sales.
At any rate, the retailer needs to get a better grasp of its inventory, and Tan thinks it has done just that. She thinks the retailer has a "substantial runway" ahead.
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