Needham analysts upgraded Lululemon Athletica Inc. (NASDAQ:LULU) from Hold to Buy, setting a price target of $475 on the stock. The change reflects renewed optimism for the company following a challenging year, during which Lululemon shares fell 25%, underperforming the broader market.

Recent indicators suggest that U.S. demand, which had slowed significantly, began to rebound strongly in December. This recovery raises the potential for improved sales momentum in the current quarter. Additionally, the analysts mentioned that Lululemon’s conservative guidance for the fourth quarter, influenced by the compressed holiday season, creates room for an earnings beat, which could further buoy investor sentiment.

Despite a modest recovery in its stock price, Lululemon remains undervalued relative to historical levels, offering a compelling opportunity for multiple expansion if the U.S. market continues to accelerate. The company’s appearance at the upcoming ICR conference in Orlando could serve as a catalyst, with the possibility of a positive preannouncement of fourth-quarter results.