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Kors Is Too Expensive, Lululemon Is Just Right

Stocks in this article: KORS LULU

NEW YORK (TheStreet) - Michael Kors (KORS) was sinking 3.2% to $79.42 after Citigroup analyst Oliver Chen downgraded the stock to "neutral" from "buy" on Tuesday.

Chen said in an investor note that the downgrade was primarily related to the stock's rich valuation though he did express concern about slower accessory sales at other retailers, particularly in watches, "which convey a possibility of lack of upside" to Kors' stock.

KORS Chart
data by YCharts

Conversely, Lululemon (LULU) shares were rising 1.2% to $58.46 after D.A. Davidson upgraded the yoga apparel maker's stock to "buy" from "neutral" and raised its 12-month price target by $6 to $73.

Analyst Andrew Burns is more optimistic on the Vancouver-based company given lululemon's long-term growth potential and expectations that a new year and a new CEO will restore the troubled company's luster.

"Despite2013 hiccups, the lululemon brand remains the leader in an attractive category," Burns writes in a note. "Consumer interest in lululemon remains incredibly high.

Over the holidays, LULU stores were consistently one of the most crowded and exciting stores at each shopping location we visited. Athletic brands as well as new entrants are making the category more competitive, but LULU remains the benchmark from both a product style and quality standpoint.

This leadership position was dented in 2013, but with new management and improved internal controls, we believe the supply chain and PR troubles of 2013 are surmountable."

--Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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