Lululemon's stock down 2% after Wells Fargo downgrade with Nike gaining as new top defensive pick
Lululemon Athletica Inc.'s stock (LULU) fell 2% Monday, after Wells Fargo downgraded the yoga gear maker's stock to equal weight from overweight, and said it's taking its chips off the table following a strong year-to-date run. The stock has gained 42.6% in 2023 so far, outperforming the S&P 500's 19% rise. Analysts led by Ike Boruchow said there were several factors behind the bank's upgrade of Lululemon back in January. These included the view that inventories would normalize after the holiday; there was material freight recapture ahead to boost margins; the company was looking at strong growth overseas, specially in China that would boost sales upside; and valuation would revert to historical norms. "Simply put, these factors have played out - likely driving the stock's outperformance in '23," said the analysts. Wells Fargo is of the view that laggard names in the retailing, specialty softlines and e-commerce space, are the ones to own right now, citing as examples, Burlington Stores Inc. (BURL), Bath & Body Works Inc. (BBWI), Gap Inc. (GPS), PVH Corp. (PVH) and Victoria's Secret (VSCO), among others. "LULU's fundamentals have been impressive the past 24 months-and as such, they don't have any "easy" P&L lines to play with (except for SG&A, which we don't believe the market will reward)," the analysts wrote. "At the same time, valuation is no longer cheap-with multiples back in line with history." Wells Fargo is now replacing Lululemon with NIke Inc., which it named a new top defensive pick. "We simply believe the recovery characteristics and self-help story now beginning at NKE make for a more compelling long idea into 2024," said the note. Nike's stock was up 1.3%.
-Ciara Linnane
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
12-04-23 1432ET
Copyright (c) 2023 Dow Jones & Company, Inc.-
Six Sports Betting and iGaming Stocks Trading at a Discount
-
4 Predictions for Stocks and the Economy for the Second Half of 2024
-
What Broadening Rally? AI Stocks Dominate Again In Q2
-
After Earnings, Is Nike Stock a Buy, a Sell, or Fairly Valued?
-
Worst-Performing Stock ETFs of the Quarter
-
Top-Performing Stock ETFs of the Quarter
-
Q2 In Review and Q3 2024 Market Outlook
-
5 Stocks to Buy for 3Q 2024
-
Industrials: Sector Offers Investment Opportunities as Performance Lags Broader Market
-
Consumer Defensives: Even Amid Macro Pressures, Deals Permeate the Landscape
-
33 Undervalued Stocks
-
Utilities: Can the Stocks Keep the Rally Going?
-
Basic Materials: Following Index Decline, We See Many Long-Term Opportunities
-
Healthcare: Valuations Look Attractive In Most Industries
-
Financial Services: Amid Uncertainties, We See the Most Value In Banks and Credit Services
-
Consumer Cyclicals: Even With Anxiety Over Spending, We See Attractive Valuations