ISIG is the latest to throw its weight behind the stock, despite the company facing a barrage of lawsuits, PR blunders and executive uncertainty. In addition to bad publicity and litigation related to its see-through black yoga pants, Lululemon has made little progress in its search for a new CEO. On June 10., Chief Executive Christine Day announced her unexpected resignation, causing shares to plummet 17.5% the following day.
The investment firm said since Day's resignation, the stock has significantly underperformed and is trading at a discount. To get the company back to its performance during the first half of the year, the Board needs to take proactive measures to bring stability to the executive team, it added.
"The first step should be to address the role of Chairman and Founder Chip Wilson, who appears to be operating without clear delineation of the Chairman's duties and responsibilities, which in turn may be having a negative impact on the company's public relations and brand image," wrote Saad. "The perception of his involvement in the business may be hindering the search for a new CEO."
"A strong CEO and management team is by far the most pressing need this company has right now, and we think it far outweighs the much publicized product and supply chain issues."
Two weeks ago, JPMorgan (JPM) initiated coverage of the stock with an "overweight" rating and 12-month price target of $84. The analysts predict annual growth through to 2017 in the high teens, spurred by 150 additional retail fronts, early stages of international expansion and increasing ecommerce sales.