Some on Wall Street are advising that lululemon athletica's (LULU) stock surge on Thursday morning should shift investors to the sideline.
Shares of the athleisure company ran to an all-time high in morning trading after reporting strong earnings in Wednesday's post-market.
However, those results may be more cause for caution that adulation in the eyes of many analysts.
"While we continue to see LULU as best in class among specialty retailers, we are on the sidelines in anticipation of potentially less margin upside in the year ahead, based on insights from our proprietary data products," Wedbush analyst Jenn Redding warned. "Long term, we see LULU as positioned better than most, but also see less upside ahead as the retailer faces tough comparisons in a dynamic retail environment, and our proprietary data products signal continued run rate pressure."
She maintained her "Hold" rating with a price target of $155 per share, suggesting Thursday's opening may have let the stock get a bit ahead of a fair valuation.
For reference, lululemon's price-to-earnings ratio is among the highest in its peer group, nearly four times that of The Gap (GPS) for example.
Even many analysts who welcomed the earnings extravaganza noted that the stock's surge may have brought the valuation firmly into view, leaving little upside still ahead.
"2019 guidance suggests a slowdown isn't imminent. Still, it's current valuation appears full, so we remain equal weight," Morgan Stanley analyst Kimberly Greenberger commented, noting the risks that remain present in the fickle fashion industry.
She set a price target at $150 per share, far below the opening price of the stock Thursday.
Overall, many analysts are noting that the company's ambitious expectations for the company will necessitate strong growth internationally and continued overtures to men, an under-penetrated demographic for the company.
Overall, investors betting on lululemon amidst this massive leap will need the company to poach these consumers not yet fitting into its product offerings to justify this premium valuation.
Analyst consensus on Wall Street has come in at $171.55 even after a spate of price target raises, leaving little potential upside left for the stock on that basis.
