Much of Wall Street has given up on Lululemon Athletica inc. (NASDAQ:LULU), with many analysts essentially saying it’s game over for the apparel maker and retailer. However, analysts at Cowen and Company are bullish and say their checks suggest things may be looking up for the company.

Lululemon Athletica Inc Coverage Initiated With 'Outperform': Cowen

Confidence in Lululemon Athletica

In their report dated Dec. 16, 2014, analyst Oliver Chen and his team said it looks like traffic at Lululemon’s stores is improving. They have confidence that the company’s new products, marketing initiatives and online momentum will bring in even more traffic.

Unlike analysts at several other firms, they think the company’s customers remain loyal, and they’re especially bullish on Lululemon because it targets consumers at the high end of the market. They believe traffic will continue to improve, thus boosting conversion rates and comparable store sales. The Cowen team notes that women’s and traffic turned positive in the third quarter. Also comparisons will begin to ease because last year’s comparable sales were not good.

Lululemon’s inventory appears to be improving

The analysts also say their checks of Lululemon’s inventory channels suggest “better in-stock positions, appealing newness in bottom patterns, and more modernized tops.” They also say the company is offering more versatile or transitional outerwear which might bring upside to management’s fourth quarter guidance.

The Cowen analysts also believe the retailer’s acceleration in traffic is sustainable because it has been managing markdowns well. The number of markdowns fell slightly in the third quarter to between 10 and 15 basis points.

Lululemon still has “obsessive loyalists”

The analysts also say Chief Product Officer Tara Poseley is having a major impact on planning the company’s assortment of offerings now. They say she’s planning the breadth and depth of what the company buys compared to changing fabrication and the company’s designs. The analysts think she will have a positive impact on Lululemon’s pants and tank top offerings as next year goes on.

Additionally, they report that their focus group meetings with women indicate that the retailer is a “leader with obsessive loyalists.” The problem for many Lululemon fans, however, is price point, as many of them can’t afford the company’s products. Nonetheless, they think the apparel maker should continue targeting the premium pricing and gross margins, thus staying with its bread and butter, the high end apparel market.

Estimates for Lululemon

The Cowen analysts are projecting an operating margin of 20.6%, which they see as being sustainable if the pricing structure remains as it is. Currently Lululemon’s pants are priced at between $82 and $108. They call the company’s products “crave-able” and add that demand remains well-batched with supply.

They’re expecting this year’s gross margin to be 51.2%, which would be an erosion of 160 basis points. The analyst say upside depends on traffic and whether it can drive fixed cost leverage and speed up the company’s supply chain. They expect to see improvements in the supply chain by the first quarter of 2016.

Lululemon Athletica coverage initiated at Outperform

The Cowen team initiated coverage of Lululemon with an Outperform rating and $64 per share price target. They note that the apparel retailer’s shares have climbed 30% since Sept. 14, but as their price target suggests, they see further upside to the current share price because they think the business is starting to turn things around.

Shares of Lululemon Athletica Inc slipped more than 2% during regular trading today.