01:01 PM EDT, 10/01/2024 (MT Newswires) -- Lululemon Athletica ( LULU ) has adopted a "thoughtful" approach in China but the company's international growth objectives for the next quarter need to be reassessed as it might not achieve as much as anticipated, Morgan Stanley said in a note Tuesday.

The brokerage's analysis of China highlights Lululemon's success in the region, which it attributes to its strategic entry and relevant brand positioning. "While that's impressive, our work shows forward expectations may be too high for China/int'l, leading us to trim our [medium-term] estimates," Morgan Stanley said.

"[Lululemon] is one of few Western specialty retailers to successfully enter China, & already represents the 3rd largest non domestic sports apparel player in the region," Morgan Stanley said, adding that the company may need to reassess its medium-term international growth targets.

Morgan Stanley's analysis indicates that Lululemon's market share in the Chinese sports apparel industry will grow at a rate similar to the last five years, adding that the revenue in China could surpass $2.7 billion by 2028, representing 7.5% of the market.

The brokerage expects a low 20% compound annual growth rate over the next 3-5 years considering Lululemon's market share in China increases at the same rate as it did in North America when it achieved a similar market position.

Morgan Stanley maintained an overweight rating on Lululemon's stock and trimmed its price target to $314 from $326.

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