Dive Brief:

• Analysts with Cowen & Co see a path for Lululemon Athletica to someday reach a $40 billion market cap, generate a Nike-esque $1 billion in cash flow a year and reach a return-on-investment rate of 44%, which would stand as the highest in softlines retail, according to an emailed report.
• The analysts, led by John Kernan, cited as growth factors Lululemon's "consistent innovation, luxury-like brand positioning and a community-based model."
• They also pointed to potential growth in menswear and international sales, as well as targets for $4.3 billion in women's apparel that would "put the brand in line with Nike and Adidas women's current global apparel businesses."

Dive Insight:

The Cowen analysts call Lululemon a "dual gender brand with unmatched loyalty," drawing numerous comparisons to Nike. "We view LULU growth, durability and ROIC [return on invested capital] profile as most [similar] to NKE," the analysts said in the report.

They point to the company's fabric innovation, which they say Lululemon has spun into a "massive addressable market." They describe as "conservative" the athleisure seller's own goal of doubling men's apparel and digital sales by 2023 and growing its women's sales from $2.6 billion to $4.4 billion, which would make it a peer to sportswear giants Nike and Adidas. 

The brand's luxury profile bolsters its profits, though Lululemon has nowhere near the sheer scale of Nike. The latter made more than $39 billion in revenue in the past fiscal year, while Lululemon made less than 10% of that. 

Nonetheless, Lululemon executives see plenty of growth ahead in North America and abroad. And the Cowen analysts agreed, pointing to possible new product categories, membership services and "an experiential based omni-quest approach and key market expansion." That may include massive digital growth as well as a new experiential store format that offers a suite of events and services, and could someday make up 10% of Lululemon's footprint.

In the near term, the analysts expect Lululemon's comp sales to reach a 15.2% increase in the third quarter and note the brand's internet search hits are up 31% year over year on a quarterly basis.