Analysts at Jefferies do not believe a new partnership announced between sports equipment company Peloton Interactive Inc (NASDAQ:PTON) and athletic apparel company Lululemon Athletica (NASDAQ:LULU) will boost the latter’s share price.
The two companies on Wednesday announced a five-year agreement in which Peloton, a stock not covered by the analysts, will become Luluemon’s exclusive digital fitness content provider.
“We view this announcement as a non-event, particularly given Peloton customers likely already shop with the brand, resulting in an immaterial impact to traffic as well as the company's overall customer total addressable market,” they wrote in a note to clients.
Peloton shares had added 5.4% at US$4.90 on Thursday’s close, while Lululemon closed flat at US$379.
The Jefferies analysts have a US$250 price target on Lululemon, representing about a 34% downside.
Lululemon is a strong brand but in the highly competitive athletic apparel industry, Jefferies analysts highlighted.
“We believe that consensus expectations are too high, particularly in the international and men's segments, given rising competition and relatively low brand awareness in many international markets,” they wrote.
“Therefore, we reiterate our view that LULU's broader business performance and fundamentals could slow from here, primarily driven by the broader macro environment alongside more difficult year-over-year comparisons.”
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