Shares of lululemon (LULU) are climbing in morning trading after a Deutsche Bank analyst upgraded the stock to Buy, as he sees the athletic apparel and footwear sector on more solid ground than previously and that the company is on track for more sustained profitable growth across its various operations.

DEUTSCHE UPGRADE: In note to clients, Deutsche Bank analyst Paul Trussell upgraded lululemon to Buy from Hold and raised his price target for the shares to $89 from $72. Trussell said he sees the company beating fourth quarter expectations and believes the stage is set for a strong first quarter given easy compares. Further, lululemon drives "enormously strong" customer loyalty, controls its distribution unlike other brands and its international business growth is in its infancy, Trussell contends. "Lululemon drives enormously strong customer loyalty, controls its distribution unlike other brands, leads the industry in full price selling, and is still in its infancy growing its International business," Trussell added. Additionally, he said that the yogawear maker's international growth pillar "continues to reflect one of the company's most significant opportunities."

LULU AT START OF INFLECTION: After meetings with lululemon's senior management team, Susquehanna analyst Sam Poser said he came away confident that the company is at the beginning of an inflection that will see its annual revenue grow to $4B and beyond and raise its operating margin to a number "that begins with a 2." The analyst, who maintained a Positive rating and $85 price target, added that the company is differentiating itself in the active lifestyle apparel space through offering "great products with great consumer engagement." Poser predicted that lululemon will remain a top player in the performance/lifestyle active wear and yoga wear space by driving consumer loyalty and long-term profitable growth through its scientific approach, store openings and expansions, international growth and data analytics.

RECENT EARNINGS AND GUIDANCE: On December 7, lululemon reported third quarter earnings and revenue that beat analysts' consensus estimates and posted an 8% increase in total comparable sales, or a 7% increase on a constant dollar basis, for the quarter. The company forecast fourth quarter adjusted EPS between $1.19-$122 on a revenue between $870M-$885M, which compares to analysts' estimates of $1.22 and $882.3M, respectively, on total comparable sales increase in the mid-single digits on a constant dollar basis. For fiscal year 2017, lululemon sees adjusted EPS of $2.45-$2.48 on a revenue of $2.59B-$2.605B, compared to estimates of $2.48 and $2.6B, on a total comparable sales increase in the mid-single digits on a constant dollar basis.

PRICE ACTION : lululemon rose 1.3%, or 97c, to $75.16 in morning trading.