By Chibuike Oguh
NEW YORK (Reuters) – Lululemon Athletica’s stock jumped by more than 10% to an almost two-year high on Monday buoyed by the addition of the Canadian sportswear maker into the Wall Street benchmark S&P 500 index.
Lululemon will replace Activision Blizzard in the S&P 500 index, effective before the market open on Oct. 18, after Microsoft completed its blockbuster $69 billion deal to acquire the videogame publisher, according to an S&P Dow Jones Indices statement late on Friday.
Inclusion of a company into the S&P 500 usually causes demand for its shares to jump as mutual fund managers and other institutional investors tracking the index begin adding the stock to their portfolios.
Lululemon’s shares rose as high as $416.01 on Monday, their highest level since December 2021. The stock is now up nearly 30% year-to-date, giving the company a market capitalization of more than $52 billion.
In September, Lululemon agreed to a deal with Peloton Interactive to become the primary athletic-apparel maker for the U.S. fitness bike manufacturer. In return, Peloton would become the exclusive digital fitness content provider for the apparel maker, developing all content for Lululemon Studio beginning in early 2024.
Lululemon had lifted its third-quarter annual profit and revenue forecast for a second time in August, citing an improvement in its North American business.
The company’s stock is trading at about 28 times its next 12-month’s earnings, compared to its five-year historical average of about 40 times, per LSEG data.
Among the 32 analysts covering Lululemon’s stock, the median price target is $450 and their current recommendation is “buy”, LSEG data shows.
(Reporting by Chibuike Oguh in New York; Editing by Lance Tupper and Sharon Singleton)