A Cowan Analyst Says Lululemon Could be the Next Nike

Lululemon’s stock is up 83% year to date.

The athletic leisurewear company Lululemon has generated a lot of buzz on Wall Street this year. The stock is up nearly 60% from a year earlier, and the company continues to exceed investor expectations with its quarterly earnings reports. 

And according to a Cowan analyst, there are more good things in store for Lululemon. Analyst John Kernan compared the company to Nike and said that he sees the company reaching a $40 billion market cap. 

The company currently has a $29 billion market cap. Let’s look at what’s been going well for Lululemon in 2019, and what we can expect going forward.

Things to like about Lululemon

Lululemon has experienced a lot of growth in 2019, largely thanks to an improvement in its men’s line, digital sales, and international growth. And the company is planning to launch a new skincare line as well.

The company has also experienced a tremendous amount of growth in its digital sales. Last quarter, the company’s digital comps increased by more than 30%. All in all, the company’s digital sales generate better margins than the company’s brick-and-mortar stores.

Lululemon’s growth in Europe did slow somewhat during its most recent quarter. However, the company has stated that Europe is closer to reaching profitability. And the company continues to make progress in China as well.

But according to Kernan, it is Lululemon’s strong customer loyalty that really makes it stand out. Plus, the company appeals to a high-end customer demographic. 

Bottom Line

Athletic leisurewear is growing in popularity with many consumers, and Lululemon is well-positioned to capitalize on this trend. The company needs to maintain its strong momentum in its digital growth. We’ll know more about that once the company releases its fiscal third-quarter earnings on Dec. 11. 

Overall, the company is seen as a moderate buy on Wall Street. The company’s average price target is $222.91, which represents a potential downside of 13%. So far, Lululemon’s shares have risen by 83%, outperforming both Nike and Under Armour.