Needham analyst Tom Nikic has maintained their neutral stance on LULU stock, giving a Hold rating yesterday.
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Tom Nikic has given his Hold rating due to a combination of factors tied to Lululemon’s updated fourth-quarter outlook and margin profile. The company now expects both revenue and earnings per share to come in at the upper end of its prior guidance ranges, indicating that near-term performance is tracking slightly better than initially anticipated. This stronger top- and bottom-line outlook is supportive, but not enough on its own to justify a more aggressive rating upgrade.
At the same time, Lululemon is maintaining guidance that calls for a substantial year-over-year decline in gross margin and some deleverage in selling, general and administrative expenses as a percentage of sales. The anticipated 580-basis-point contraction in gross margin suggests notable profit pressure, even as sales continue to grow. The combination of modest upside to revenue and EPS guidance, offset by meaningful margin headwinds, leads Nikic to a more balanced view of risk and reward, which is reflected in his decision to keep the stock at a Hold rating rather than moving to a more bullish stance.
In another report released yesterday, Telsey Advisory also maintained a Hold rating on the stock with a $215.00 price target.