Nike Sues Lululemon over Mirror Home Gym; Shares Drop

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Nike Inc (NYSE: NKE) has filed a lawsuit against Lululemon Athletica Inc (NYSE: LULU) for patent infringement over Lululemon’s Mirror fitness device and related mobile applications, according to CNBC.

Following the news, shares of Nike, the leading multinational footwear and apparel giant, dropped 2.5% to close at $162.5, while shares of Lululemon dropped 4.8%.

About the Mirror

Due to the pandemic, athletic apparel makers were at an advantage as more and more people worked from home switching from formal attire to casual clothing including hoodies, leggings, and other casual wear.

In July 2020, Lululemon acquired Mirror, an interactive workout platform offering live and on-demand classes to clients from the comforts of their homes, for $453 million.

Mirror is a wall-mounted device that enables users through a variety of high-intensity cardio classes and other related exercises.

Details of the Lawsuit

According to the lawsuit, Lululemon Athletica was making and selling the Mirror Home Gym and associated mobile apps without prior authorization from Nike.

Back in 1983, Nike claims to have invented and filed a patent application for a device that measures a runner’s speed, distance covered, elapsed time and calories burnt. In addition, it had launched a suite of famous mobile apps including Nike Run Club and Nike Training Club.

In the complaint, Nike accused Lululemon of infringing a number of fitness equipment patents by selling Mirror.

Lululemon Dismisses Nike’s Claims

Earlier on November 3, Nike notified Lululemon of the alleged infringement before filing the lawsuit, which was dismissed by Lululemon.

In response to the current lawsuit, Lululemon management stated, “The patents in question are overly broad and invalid. We are confident in our position and look forward to defending it in court.”

Analysts Recommendation

On December 29, UBS analyst Jay Sole reiterated a Buy rating on Nike with a price target of $192 (18.3% upside potential).

Sole is bullish on Nike’s direct-to-consumer business growth prospects and related margin expansion and expects it to represent 75% of total revenues. He believes Nike will outperform and meet its fiscal 2025 goals “sooner than expected and then surpassing them.”

Consensus among analysts is a Strong Buy based on 16 Buys and 4 Holds. The average Nike stock price forecast of $187.11 implies 15.3% upside potential from current levels.

Smart Score 

Nike scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations. Its upcoming earnings for the third quarter are scheduled for March 17, 2022.

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