BMO initiates Lululemon with an underperform rating and a target price of $70

BMO Capital Markets this week initiated coverage of Lululemon for the first time, assigning it an underperform rating. The firm stated that the sportswear company's transformation will not be quick or easy, as it continues to cede market share to competitors and faces worsening sales declines. Analysts led by Kelly Crago noted that the Vancouver-based company's weak quarterly report and lowered full-year outlook reveal a business facing deep-seated challenges. As emerging brands like Alo and Vuori gain increasing popularity among younger consumers, performance in the Americas region is deteriorating. Crago's target price of $70—which, according to compiled data, is the second-lowest on Wall Street—implies a decline of about 28% from Thursday’s closing price. BMO is just the latest institution to sound a bearish note on the retailer; at least four brokerages have downgraded the stock since June. Currently, the stock carries six ratings equivalent to sell, 29 hold, and two buy.