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LULU at the Lows

Stock (Symbol) Stock Price

Lululemon Athletica (LULU)

$59

Data is as of Expected to Report Sector

December 29, 2013

Mar 27

Retail & Restaurant

Sharek’s Take
David SharekLululemon’s having trouble. The stock’s at its 52-week lows as the company keeps lowering earnings estimates. With a P/E of 25 LULU’s not on sale either. There’s a lot to blame here: New CEO coming on, slow retail environment, product recalls, higher inventory levels. But the bottom line is every time LULU has gone down this year it has bounced right back up. If you would have bought LULU low and sold it high you would have made a lot of money this year. Now with LULU at its lows of around $60 I think a little good news will push the stock to $75. At that point we have a decision to make. Not all is bad here, same store sales rose 5% last quarter and sales grew 20% overall. The company also has a solid online business that is blossoming.
One-Year Chart
LULU_2013_Q4I wish this stock was selling for 20 times earnings, LULU’s fairly valued right now which sucks because I want good upside. Estimates 2QtrsOut are high because LULU had a bad qtr a year ago. Note the stock has bounced many times this year, going from fairly valued to overvalued.
Earnings Table
LULU_2013_Q4_EPSSales rose 20% last quarter, down from 22% 2QtrsAgo. At least profit growth was 15% last quarter, that’s decent.

Lululemon beat by 4 cents for the second straight quarter. The problem is the company lowers estimates before beating them.

Annual Profit Estimates
continue to erode. These numbers need to increase for the stock to go up.Quarterly growth looks decent, but the numbers are coming down. We need some stability here.
Fair Value
LULU_2013_Q4_PHThis isn’t the same company it was years ago. I tracked LULU back-in-the-day and what it did well was have BIG increases in annual estimates. Now those numbers are coming down, not up. So the stock’s not worth 35 times anymore, 25 times is more appropriate.
Ten-Year Chart
LULU_2013_Q4_10yrThis is a great long-term base if the company can turn momentum around. With only 5% profit growth this year, comparisons should be easy next year.
Power Ranking Bottom Line
Growth Portfolio

26 of 26

Lululemon is at its lows and at a good buy point for traders. For long-term investors, the stock’s fairly valued and isn’t on sale. I feel LULU goes from $60 to $75 and at that point I need to decide if we stick around.

LULU is ranked 26th of 26 stocks in the Growth Portfolio Power Rankings where it is also my smallest holding (has been for a while). LULU isn’t in the Aggressive Growth Portfolio.
Aggressive Growth Portfolio

N/A

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