What Happened?
Shares of athletic apparel retailer Lululemon (NASDAQ: LULU) jumped 3% in the afternoon session after an analyst at BTIG reiterated a "buy" rating on the stock ahead of its third-quarter earnings report.
The BTIG analyst maintained the firm's recommendation and a $303 per share price target. The note suggested there was upside potential in the stock due to what was described as gloomy investor sentiment and low valuations. The research firm also noted it expected the company's upcoming third-quarter results to align with guidance. This positive sentiment was also reflected in the options market, where an unusual number of traders took a bullish stance on the athletic apparel company.
After the initial pop the shares cooled down to $182.85, up 2.9% from previous close.
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What Is The Market Telling Us
Lululemon’s shares are somewhat volatile and have had 13 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock gained 2.8% on the news that comments from a key Federal Reserve official boosted investor optimism for a potential interest rate cut.
New York Federal Reserve President John Williams, a voting member of the rate-setting committee, suggested he sees room for "further policy easing," which sent a strong signal to the markets. Following his remarks, the probability of a December rate cut, as measured by the CME FedWatch Tool, surged from 39% to 71%. Lower interest rates can stimulate the economy by making borrowing cheaper for both consumers and businesses, which often translates to increased consumer spending. This prospect is outweighing recent reports of lower consumer confidence, as investors bet that a more accommodative Fed policy will support retailers through the holiday season.
Lululemon is down 50.9% since the beginning of the year, and at $182.85 per share, it is trading 56.6% below its 52-week high of $421.16 from January 2025. Investors who bought $1,000 worth of Lululemon’s shares 5 years ago would now be looking at an investment worth $500.41.
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