Shares of Lululemon Athletica Inc. rose in trading Wednesday after a Credit Suisse analyst upgraded his firm's rating on the yoga clothing maker's stock.
THE SPARK: Credit Suisse analyst Christian Buss changed his rating to "outperform" from "neutral", saying he is confident the company can continue its enviable sales trends and deliver strong earnings. He increased his earnings estimates and raised his target price on the stock from $58 to $78.
THE BIG PICTURE: Lululemon has a loyal base of customers willing to spend top dollar for its clothing and gear. Unlike many retailers, it manages to sell most of its products at full price.
As a result, it has delivered steady sales and profitability gains recently and, in January, it raised its fourth-quarter outlook. Lululemon has become a favorite with investors too: Its stock price has increased more than 50 percent in the past year.
THE ANALYSIS: After a survey across several markets, Buss said he is increasingly confident the company can maintain its double-digit growth in revenue from stores open at least a year. This is a key measure of financial performance because it excludes the impact of recently opened or closed stores.
Buss expects its newer stores to continue to boost its earnings, but he also sees an opportunity for growth as the company expands into new markets.
SHARE ACTION: Shares of Lululemon rose $2.22, or 3.4 percent, to $68.27 by mid-afternoon. They have traded between $36.51 and $71.41 the past year.