Shares of Lululemon are poised to do well even as the world emerges from the Covid-19 pandemic, according to Truist. "We believe LULU has momentum beyond the pandemic, driven by (1) consumer prioritization of health & wellness, (2) a growing TAM, (3) improved store traffic/inventory levels and (4) modest go-forward EBIT margin expansion," analyst Beth Reed wrote Tuesday. "Further, we view LULU's higher income customer base and pricing power as key assets in an inflationary environment." Reed upgraded Lululemon to buy from hold, saying she expects the company to issue a "robust" five-year financial outlook at its April 20 analyst day. Truist raised the price target to $495 from $390. The new price target is nearly 28% above where shares closed Monday. Lululemon shares were buoyed in 2020 and 2021 thanks to strong online sales and consumers looking to become more active and healthy amid the pandemic. Since the March 2020 market low, the stock has more than doubled. However, the stock is flat for 2022. Reed noted that she believes Lululemon's valuations have become attractive since Truist first initiated coverage in December. "We see current levels as an attractive entry point for what we view as a quality long-term growth story," Reed wrote. A higher income consumer base will also help Lululemon in an inflationary environment. Truist expects price increases in about 10% of styles could help the company offset rising costs. Shares of Lululemon gained 2.6% on Tuesday. —CNBC's Michael Bloom contributed to this report.
Shoppers walking into a Lululemon store
Scott Mlyn | CNBC
Shares of Lululemon are poised to do well even as the world emerges from the Covid-19 pandemic, according to Truist.