Blackmont Downgrades Lululemon For Running Ahead Of Fundamentals

Lululemon Athletica Inc. (LULU) has been downgraded at Blackmont Capital. But not because the yoga expert is doing anything wrong.

The company made upward revisions to its third quarter guidance on Tuesday, saying same-store sales will be in the mid-30% range. Previous guidance was 15% to 20%, so it came as little surprise that the stock soared 16%.

But it is this dramatic share price surge (up nearly US$30 from its IPO price of US$18 in late July) that is forcing analyst Barbara Gray to move to a “hold” recommendation. The stock blew past her US$41.50 price target.

“In the short-term, LULU’s sharp price surge has pushed it ahead of its underlying fundamentals,” she said in a note to clients, adding that investors should look for any pullback or evidence of even better fundamentals to establish a stake in the retailer.