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Lululemon Athletica Just Got its Mojo Back

Stock (Symbol) Stock Price

Lululemon Athletica (LULU)

$76

Data is as of Expected to Report Sector

Oct 8, 2012

N/A

Retail & Restaurant

Sharek’s Take
David SharekLululemon got its mojo back after reporting solid results last quarter. Business is so good that not only did LULU beat the street, estimates got increased across the board and the stock popped from $68 to $77.

The only problem is LULU at $76 is now within striking distance of its Fair Value of $82. So right now the stock doesn’t have much upside. Investors looking ahead to 2013 will appreciate the $101 Fair Value which is 33% higher than now. On the other hand same store sales increased a robust 15% and that tells me LULU should continue to beat the street next quarter and possibly rise again on positive news.

One-Year Chart
LULU has formed a really good cup-and-handle. It’s just too bad the stock probably won’t break out. I feel LULU is worth 45 times earnings, and with a P/E of 42 there’s not a lot of bang-for-your buck. The stock is selling for 34 times 2013 earnings, so we could see a swift move up towards the end of this year.
Earnings Table
A quarter ago I thought LULU lost its mojo partly because profit growth fell to 45%. But last quarter profit growth was 50%, so business got better. Sales rose 33% last quarter.

Lululemon beat the street by a solid 8 cents last quarter, four times the 2 cent beat 2QtrsAgo. Solid quarter guys, solid.

Annual Profit Estimates fell last quarter and bounced higher this quarter — by a healthy amount.

Quarterly estimates look good. These also increased. Yes, this stock should break out around year-end.

Fair Value
LULU is selling close to its 2012 Fair Value but has good upside through 2013.
Ten-Year Chart
Wow, the EPS Growth at the bottom looks great. Now 44% growth is expected this year (up from only 29% last quarter). I also like the fact LULU hasn’t hit all-time highs in a while, but that choppy chart pattern isn’t pretty.
Power Ranking Bottom Line
Growth Portfolio

8 of 16

Last quarter Lululemon looked like it had lost its luster. This quarter I see that’s not the case. Look for LULU to break out around New Years.

LULU is ranked 8th in the 16 stock Growth Portfolio Power Rankings. I sold LULU from the Aggressive Growth Portfolio after last quarter’s research report and with limited near-term upside I’m not going to put it back in this portfolio right now.

Aggressive Growth Portfolio

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