Buy Lululemon, Stock Could Gain Over 15%: Argus

Shares of Vancouver-based apparel maker Lululemon Athletica Inc. (LULU), already up 66% year-to-date (YTD) versus the S&P 500's 6.4% increase over the same period, could rally another 15% over the next 12 months, according to one team of bulls on the Street. (See also: Lululemon Diversifies Outside Yoga, Invests in Cycling Apparel Startup.)

Analysts at Argus upgraded shares of the athleisure clothing and accessory company, citing upside from an expansion in foreign markets and a push into men's offerings, as reported by Barron's. 

The Canadian firm, which rivals Nike Inc. (NKE) and Under Armour Inc. (UAA) with high-end athletic wear, has seen its stock more than double in 12 months thanks to investor optimism regarding new management, continued popularity of athleisure apparel among Millennial consumers, pricing power and other factors. 

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In a note to clients Thursday, Argus analyst John Staszak upgraded shares of Lululemon to buy from hold. His 12-month price target of $150 implies a 15% upside from Friday morning as shares trade up 0.7% at $130.36. 

Staszak highlighted Lululemon's "substantial opportunities" outside of its main markets in North America, particularly in China, as the company is aided by its strong band and high-growth e-commerce segment. He views the firm's growth prospects as "among the best in the apparel sector."

As higher-margin e-commerce sales couple with favorable operating leverage to lead to improved operating margins for years to come, Argus views a new focus on men's products providing a boost to top line numbers. The analyst indicated that these solid fundamentals warrant the stock to trade at a valuation of 44 times his fiscal 2019 estimates, in range with other major athletic and apparel competitors like Nike and VF Corp. (VFC), which he also rates at buy. (See also: Lululemon Stock Gets a Lift as Sephora Exec Takes CEO Reins.)