Categories Analysis, Retail

Is Lululemon’s bull run coming to an end?

Lululemon Athletica (NASDAQ: LULU) is one apparel brand that has been cruising despite the onslaught of online shopping giants. Since its public debut 12 years ago, the Canadian apparel firm has seen its stock soar over 1,200%. To bring some perspective, the S&P 500 index has gained just over 100% during the same period.

As the company continues to impress the street quarter after quarter, the stock has maintained its bull run this year and is up 57% till date. The stock is currently trading near an all-time high at around $194. So has it hit a roof?

lululemon
Image for representation (Photo by Mark Zamora on Unsplash)

Overvalued, with an upside

As counterintuitive as it may sound, Lululemon presents an ironic scenario to investors. The strong rally indeed has resulted in the stock being overvalued from a fundamental point of view, but the street continues to be bullish on the stock. In fact, 16 out of 24 analysts covering the stock feel it is buy-worthy.

Not a single analyst has a sell rating on the stock, signifying its continued growth potential in the coming years. Most of the optimism is derived from the strong operational performance of the company, efficient management and the strong outlook on the athleisure industry.

While these factors should help Lululemon sail through in the coming years, the hidden threat is the downward potential in the event of an unforeseen change in the market sentiment. The effects of a valuation boom would then come into play, pinching it more than it actually should. But then, it’s a “what if” scenario.

lululemon comp sales trend

Solid stock

Earlier this month, Lululemon surpassed market expectations for the second quarter, aided by a 15% increase in comparable sales. It may be noted that the sports apparel retailer has consistently reported double-digit comp sales in the trailing seven quarters.  The management also raised its guidance for the full year.

The company’s loyalty program, which was rolled out only in a few regions on a trial basis, is already showing a lot of promise and is bringing consistent revenues. With the expansion of the program to other areas, the company may expect to see a further boost in the topline.

READ: Major IPOs expected in late-2019 or 2020

The Vancouver-based firm will probably flow these extra revenues into international expansion, where it expects to quadruple sales by 2023. The company is already taking its expansion activities quite seriously by quickly adding more stores, especially in the Asia Pacific region.

Lululemon is also doubling down on new products, which are expected to drive margins in the long-term.

With relatively low debt and potential for strong growth ahead, it may be safely assumed that the stock’s rally is not yet over.

Get access to timely and accurate verbatim transcripts that are published within hours of the event.

Most Popular

Earnings: Hewlett Packard Enterprise (HPE) Q4 earnings beat Street view

Information technology solutions provider Hewlett Packard Enterprise (NYSE: HPE) Tuesday reported higher earnings and revenues for the fourth quarter of 2022. The bottom line also exceeded analysts' forecasts. Fourth-quarter profit,

Intuit (INTU) Q1 2023 Earnings: Key financials and quarterly highlights

Intuit (NASDAQ: INTU) reported first quarter 2023 earnings results today. Total revenue grew 29% year-over-year to $2.6 billion. Net income was $40 million, or $0.14 per share, compared to $228

Pinterest (PINS): Here are three factors that work in favor of this social media company

Shares of Pinterest Inc. (NYSE: PINS) were down on Tuesday. The stock has dropped 33% year-to-date and 39% over the past 12 months. Pinterest was one of the stocks that

Add Comment
Loading...
Cancel
Viewing Highlight
Loading...
Highlight
Close
Top