Lululemon (LULU) Jumps on JPMorgan 'Overweight' Rating

NEW YORK (TheStreet) -- Lawsuits and PR blunders aside, Lululemon  (LULU) is a buy at JPMorgan which initiated coverage of the athletic apparel designer with an "overweight" and 12-month price target of $84. That's a big change for a company that had to fight off bad publicity linked to its see-through black yoga pants.

Shares were jumping on the ratings debut, gaining 4.4% to $69.87.

"The Lulu story is evolving from a double-digit comp and North American unit expansion story to one of a slightly more mature, global growth retailer," wrote JPMorgan retail analysts Brian Tunick and Kate Fitzsimons in a research report.

The analysts predict compound annual growth through to 2017 in the high teens, spurred by 150 additional retail fronts, early stages of international expansion and increasing ecommerce sales. Operating margin is also expected to grow to between 26% and 27%, higher than management's goal of 25%.

"We believe that the shares of Lulu deserve a premium valuation given its niche, premium positioning, top- and bottom-line growth potential, strong margins, and now, margin recovery story," said Tunick and Fitzsimons.

The vote of confidence comes as a surprise after the Vancouver-based business' turbulent year. In March, the retailer recalled its primary product, black yoga pants, after customer complaints the material was too sheer. A related lawsuit has been brought against the company by the Louisiana Sheriffs' Pension & Relief Fund, which holds around $1.3 million in stock.

Then, on June 10., Chief Executive Christine Day announced her unexpected resignation, causing shares to plummet 17.5% the following day. The Board has yet to find a replacement.

If you liked this article you might like

PayPal Owns a Millennial-Friendly Business That Might Send Its Stock Soaring

As Target and Walmart Move Away From AWS, How Much Pain Will Amazon Feel?

Hurricane Harvey and a Disappointing Jobs Report -- Week in Review

Nasdaq Seals New Record but Weak Jobs Report Raises Fed Questions