Continued Deterioration

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Stock (Symbol) Stock Price

Lululemon Athletica (LULU)

$53

Data is as of Expected to Report Sector

April 11, 2014

Jun 12

Retail & Restaurant

Sharek’s Take
David SharekLululemon’s profit estimates continue to deteriorate. Now 2014 profits are expected to be around what 2013’s were. That’s no growth. No growth for 28 times earnings. Plus the stock market is in a correction right now, and lots of other stocks I want to buy are on sale. I’m going to sell my LULU shares from the Growth Portfolio today. This isn’t a big deal, LULU was the smallest position in my portfolio anyway.
One-Year Chart
LULU_2014_Q10% profit growth last quarter, Estimates show 0% next quarter. A P/E of 28 is high for this stock, which I feel should sell for 20 times earnings. Plus, the stock’s not at a bad spot to sell at, its off its lows.
Earnings Table
LULU_2014_Q1_EPSNo profit growth and only 7% sales growth? If sales were growing 15% I could see staying with the stock, but not 7%.
 
Lululemon missed estimates by two cents but was worse is the company slashed quarterly estimates going forward.
 
Annual Profit Estimates
 keep falling. This is bad.
 
Quarterly estimates look terrible.
Fair Value
LULU_2014_Q1_PHAnd after all that red in the Earnings Table, the stock is also overvalued.
Ten-Year Chart
LULU_2014_Q1_10yrBack when LULU was making its big run higher, the company was beating the street and upping annual estimates. It was a textbook example. That’s what fueled the run. Those days are long-gone.
Power Ranking Bottom Line
Growth Portfolio

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Lululemon is a stock I’ll continue to watch, as annual estimates could rebound eventually. But right now the stock seems high and I can use the money for other stocks I like better.
 
LULU will be sold from the Growth Portfolio today. It isn’t in the  Aggressive Growth Portfolio.
Aggressive Growth Portfolio

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tags:
David Sharek David Sharek is stock portfolio manager and CEO of DavidSharek.com. David believes a company's profits ultimately drive the price of its stock. His book The School of Hard Stocks can be found on Amazon.com.