'Lulu's Juice Is Still Worth The Squeeze'

Yoga Lululemon

Photo: Lululemon, Flickr

The big call of the day…UBS analyst Roxanne Meyer is bullish on yoga-gear maker Lululemon.

Her note is titled “Lulu’s Juice Is Still Worth The Squeeze.”

Why the optimism?

Our Buy thesis on LULU is based on: 1) deep competitive advantages (inc. product innovation, scarcity model, grassroots marketing, management), 2) industry-leading growth which is still in early innings across channels and geographies, 3) strong comp momentum to minimize near- t.erm margin headwinds, and 4) though meaningful margin upside is limited, underappreciated margin divers in FY13/14.

As for the numbers:

We look for 30+% EPS growth over the next few yrs given: 1) its ability to ~triple its US base, 2) wide brand appeal given lifestyle focus, 3) product innovation, 4) increased inventories/product f.low, 4) the wide gap between US and Canada sales productivity (see analysis of closing the gap pgs 17-18), 5) potential to more than double ecommerce, and 6) international potential – could add $0.10-0.20 by ’16.

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