Lululemon Upgraded To Overweight At Morgan Stanley, Price Target Increased To $68

Lululemon was upgraded to overweight from equal-weight at Morgan Stanley, encouraged by the new leadership's ability to generate sales growth. The upgrade was in large part prompted by the 11% same-store sales reported for the second quarter which "suggests consumers are returning to the brand-- our greatest source of skepticism following 2013's product recall, and a key tenant of our prior equal-weight rating," Morgan Stanley said in a note. The company's price target was raised to $68 from $56. Earnings per share growth stalled since 2012 and EBIT margin decreased to a 2015 estimate of 18.5% from 27.5% in 2012 after the recall. But Morgan Stanley's analysis suggests the company could reach 20% earnings per share growth in 2016 based on growth potential in underappreciated areas like international expansion, its menswear business, and the roll out of the ivivva label for girls.

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