Lululemon is ‘one of the best growth stories in retail’: BofA

Following Lululemon's (LULU) upbeat earnings results, Bank of America (BofA) sees the Vancouver-based company as the "one of the best growth stories in retail."

"We reiterate our Buy and $400 PO [purchase order] as we continue to have confidence in lululemon (LULU)'s diversified growth profile and view current price levels as a particularly attractive buying opportunity for one of the best growth stories in retail," BofA's Lorraine Hutchinson, CFA, wrote to clients on Friday.

Lululemon earned $1.48 a share on revenue of $1.61 billion, compared to analysts expectations of $1.42 a share from revenue of $1.55 billion.

"This sales strength was particularly impressive given shutdowns in China (about 7% of sales)," Hutchinson added.

Lululemon benefited from the pandemic as consumers sought out for yoga pants and leggings to wear at home. Shoppers are still buying so-called athleisure items, and the athleisure brand has expanded the assortment with their recent launch in footwear and skin-care products.

"Inventory in 1Q increased 74% y/y," Hutchinson wrote. "On a unit basis (3yr CAGR) [compound annual growth rate], inventory increased 36%, inclusive of 5 percentage points of in-transit inventory. This view on inventory is well aligned with [management's] outlook for F22 sales growth of 24-25% on a 3yr CAGR basis. With 45% of the balance in core, seasonless products, we see little risk to margins."

UBS, meanwhile, maintained their Neutral rating and lowered their price target from $430.00 to $365.00

"We have increased conviction in a more robust sales outlook, [thought] we think more meaningful EPS upside is limited given macro headwinds and ongoing supply chain challenges," UBS analyst Jay Sole wrote to clients on Thursday. "Without a catalyst to drive P/E [price/earnings ratio] expansion, we doubt the stock will be a big outperformer. Thus, we maintain our Neutral rating. We also see a balanced upside/downside skew."

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv

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