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Oppenheimer Has High Hopes For Lululemon Going Into Q2 Results

lululemon athletica inc. NASDAQ:LULU - Oppenheimer Has High Hopes For Lululemon Going Into Q2 Results

A week ahead of the earnings announcement from Lululemon Athletica inc. LULU 2.98%, Oppenheimer remains bullish on the second-quarter results. Analyst Anna Andreeva maintains an Outperform rating on the stock.

The brokerage's confidence is due to the improvements in industry average demand compared to the first quarter. Andreeva pointed out sales have advanced 1 percent sequentially. The company's history of beating sales guidance also boosted sentiments. Sales topped guidance in the last five of the six quarters. Therefore, expectations remain high that Lululemon's second-quarter top line will exceed the expectations.

"We think product execution keeps improving (better balance in tops across price points; last year's pant wall launch is being lapped with expanded Align fits & colors) with margin recapture accelerating (internal supply chain initiatives ahead of plan, inventories cleaned up); trading at 32x '17E EPS, valuation delta compressing vs. UA/NKE and embeds both continued top line/earnings upside," the analyst said.

Related Link: Cramer On Lululemon's Director Resignation: "Her Qualifications Weren't As Strong" And Served As A "Life Coach"

While stating that June was the best month of the second quarter, the analyst shared that July was likely to have witnessed a slowdown. Another favorable point is that the brokerage expects margins to inflect following a four-year drop driven by product margin.

Oppenheimer also listed women's tops as remaining the biggest opportunity and broadening the horizons, as the key points in driving the sales in the fourth quarter. The analyst also believes the stock is priced at a premium compared to the modest discount historically.

At time of writing, shares of the company traded at $81.61, up 1.78 percent on the day.

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