Key Points
Lululemon stock beat earnings last week.
Activist investor Elliott Management has bought $1 billion in Lululemon stock, and supports a turnaround in the business.
Investment bank Jefferies is modestly optimistic about the stock.
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Lululemon Athletica (NASDAQ: LULU) stock jumped 6.4% through 10:20 a.m. ET Thursday. You can thank Jefferies in part, as the investment banker raised its price target on Lulu to $200 this morning.
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Image source: Lululemon Athletica.
Lululemon Q3 earnings
Lulu is coming off a promising earnings report last week, in which the athleisure retailer reported strong growth in international sales and earnings well ahead of analysts' targets. What really gets Jefferies excited about the stock, though, is news that activist investor Elliott Management bought a $1 billion stake in Lulu stock.
Elliott is pushing Lulu's board to return to its roots and adopt changes urged by its founder, Chip Wilson, to make the lululemon brand "cool" again. Jefferies notes this will take years to accomplish. While the banker is optimistic enough about the effort to raise its price target on Lulu stock, it's not quite confident enough to actually upgrade its rating on Lulu stock to "buy."
In a separate note today, Needham analyst Tom Nikic (who also has a "hold" rating on Lululemon) suggests that the company should hire former Coach and Ralph Lauren CFO Jane Nielsen to turn around Lululemon's business.
Is Lululemon stock a buy?
Guidance for Q4 was somewhat weak, with the company forecasting a 1% to 3% sales decline and weaker earnings than Wall Street had anticipated. Management announced this morning, though, that it will be doubling down on its strongest growth segment, international, with store openings in six new markets in 2026. With Lulu priced under 15 times trailing earnings, the stock won't require significant growth to justify this price.
If the international growth pays off, Lululemon stock just might be a buy.
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