Is LULU Stock 'Dead Money’? Jefferies Believes So But Calls CEO Change A 'Big Positive', Recommends Return To Roots

• BofA said the leadership change would bring a fresh perspective at the top to help stabilize the company’s sales.
• However, a Citi analyst noted that Lululemon’s CEO change will bring new uncertainty.
• Goldman Sachs said that stronger international trends, improving margins, and clearer initiatives offer some optimism about Lululemon’s prospects.

Lululemon Athletica Inc. (LULU) “must return to its roots,” and the company’s board of directors needs to find a leader to help the athletic apparel maker achieve this, following the exit of CEO Calvin McDonald, said Jefferies in its latest note.

According to TheFly, Jefferies said that the leadership change is a “big positive” for Lululemon. The firm upgraded the company to ‘Hold’ from ‘Underperform,’ while hiking the price target for the LULU stock to $170 from $120, implying a downside of 9% from the stock’s closing price as of Thursday.

Lululemon shares were up nearly 9% in Friday’s opening trade. Retail sentiment on Stocktwits around the company trended in the ‘extremely bullish’ territory.

LULU Stock ‘Dead Money’

Jefferies said it expects Lululemon shares to be range-bound, calling the stock “dead money.” However, the firm’s analyst believes the leadership change is a catalyst for positive change at Lululemon.

Lululemon CFO Meghan Frank and Chief Commercial Officer Andre Maestrini have been named as the interim co-CEOs while the company looks for McDonald’s successor.

Price Target Hikes Pour In

Several other firms also hiked their price targets for the LULU stock following the company’s third-quarter (Q3) earnings.

BofA hiked its price target for Lululemon to $220 from $185 while maintaining a ‘Neutral’ rating. The firm said the leadership change would bring a fresh perspective at the top to help stabilize the company’s sales. However, it noted that a turnaround will take time, especially given Lululemon’s long lead times.

Citi hiked its price target as well, to $210 from $190, with a ‘Neutral’ rating. However, the firm noted that Lululemon’s CEO change will bring new uncertainty.

Goldman Sachs said that stronger international trends, improving margins, and clearer initiatives offer some optimism about Lululemon’s prospects. The firm hiked its price target for the LULU stock to $200 from $180, with a ‘Neutral’ rating.

Founder Chip Wilson Weighs In

Lululemon founder Chip Wilson also weighed in on the company’s leadership changes. He stated that Lululemon needs to bring in new, independent directors with “real experience” to lead the search for a new CEO.

“I believe that the Board should seek the advice of individuals with specific and unique expertise, and deep knowledge of the Company, to advise on the CEO selection process,” said Wilson.

He added that he knows there are several qualified CEO candidates who can succeed McDonald, while stating that he hopes Lululemon’s board would continue its dialogue with him to find new directors.

LULU stock is down 51% year-to-date and 53% over the past 12 months.

Also See: Robert Reich Sounds Alarm: Trump’s Grip On Private Sector In Spotlight As Paramount, Netflix Battle For WBD Heats Up

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