Can Lululemon Keep Up the Momentum?

  • Like on Facebook
  • Share on Google+
  • Share on LinkedIn

With shares of Lululemon Athletica Inc. (NASDAQ:LULU) trading at around $76.88, is LULU an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Lululemon might be one of the most hated success stories in existence. To many investors, it’s a fad that will eventually fade away. While that’s not likely, there are potential dangers ahead, especially considering the company’s premium pricing strategy.

While Lululemon has been hot for years, what happens when the economy sours? Okay, the economy has already soured. Therefore, the question should be rephrased: what happens when the stock market comes back down to reality? That answer is twofold. Once, it’s an expensive growth stock and investors will want no part of it. Two, since Lululemon attracts a mostly affluent crowd, some of these shoppers will lose household income through investments. In all, a vicious cycle might present itself.

However, Luluemon does have a lot of momentum, and it’s not ordinary momentum. Lululemon has more than just customers. It has created a family-like atmosphere for its customers. This has been accomplished through superb customer service and unique events. For example, customers can contact a local store to set up a Yoga Rave. The following is an example. Even if you don’t like Lululemon and/or the stock, you might enjoy the video if you appreciate an energy boost. Or, since it’s Friday, perhaps it can get your blood flowing for the weekend:

Sticking with the positive angle for now, Lululemon is confident in its future potential, considering its adding more locations. Analysts also tend to favor the Buy side: 11 Buy, 11 Hold, 3 Sell. Other positives for Lululemon include improved productivity, focused merchandising, consistent improvements in revenue on an annual basis, consistent improvements in earnings on an annual basis, strong margins, and an impressive recovery from its “pants crisis”.

Now let’s take a look at some numbers. The chart below compares fundamentals for Lululemon, Under Armour (NYSE:UA), and The Gap (NYSE:GAP).  Lululemon has a market cap of $10.96 billion, Under Armour has a market cap of $5.95 billion, and The Gap has a market cap of $17.62 billion.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

LULU

UA

GPS

Trailing   P/E

41.03

49.89

16.28

Forward   P/E

29.65

30.83

12.92

Profit   Margin

19.74%

6.34%

7.25%

ROE

36.35%

16.07%

40.18%

Operating   Cash Flow

$280.11 Million

 $198.27 Million

  $1.94   Billion

Dividend   Yield

N/A

N/A

1.60%

Short   Position

37.00%

18.80%

3.00%

 

Let’s take a look at some more important numbers prior to forming an opinion on this stock.

More Articles About:

To contact the reporter on this story: staff.writers@wallstcheatsheet.com To contact the editor responsible for this story: editors@wallstcheatsheet.com

Yahoo Finance, Harvard Business Review, Market Watch, The Wall St. Journal, Financial Times, CNN Money, Fox Business