Lululemon Athletica (LULU) is holding near highs ahead of its Sept. 8 earnings report, but does that make Lululemon stock a buy now?
Lululemon stock gets high marks from IBD Stock Checkup because of strong fundamentals and price performance. For the current quarter, the Zacks consensus is for adjusted profit of $1.20 a share, up 62% from the year-ago quarter. Revenue is expected to jump 48% to $1.34 billion.
LULU stock started its latest rally soon after the company reported earnings in early June. Adjusted profit of $1.16 a share was up 404% from the year-earlier quarter. Sales jumped 88% to nearly $1.23 billion.
Lululemon’s direct-to-consumer revenue climbed 55% to $545.1 million year over year. Sales in North America were up 82% and increased 125% internationally.
Fiscal 2022 earnings are expected to surge 47%, with growth slowing a bit in 2023, up 22%.
Last year, Lululemon announced plans to buy at-home fitness startup Mirror for $500 million. Wall Street liked the sound of the deal, sending shares higher by 6% on June 30. A few days later, Bank of America said the acquisition could generate $700 million in revenue and reach 600,000 subscribers by 2023.
Mirror generated $170 million in revenue in 2020. The company expects Mirror to contribute $250 million to $275 million in revenue this year.
Lululemon Stock: Back in Rally Mode
It’s no secret why Lululemon stock has been a big winner in the retail sector in recent years. Long known for its yogawear, the retailer has a strong track record of execution.
In late March, Lululemon reported its third straight quarter of accelerating revenue growth. Sales rose 24% to $1.73 billion vs. expectations of $1.66 billion.
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Online sales spiked 94% for that quarter, making up about 52% of total sales. Women’s sales grew 19% and men’s sales increased 17%.
In North America, revenue increased 19%, boosted by its e-commerce business.
Overall direct to consumer revenue soared 94%, the company said, representing 42.8% of total revenue. In the year-ago quarter, direct to consumer revenue accounted for 26.9% of total revenue.
International sales jumped 47%.
LULU Stock: Fundamental Analysis
Lululemon’s core women’s business continues to thrive, but the company also has expanded successfully into the men’s category, as well as in new markets like Europe and Asia.
The company has a five-year annualized earnings growth rate of 26%. Annual return on equity in Lululemon’s latest fiscal year was 27%.
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Lululemon’s Composite Rating of 99 ranks it tops in its industry group, according to IBD Stock Checkup. Other top-rated stocks in the group include Revolve Group (RVLV), Boot Barn (BARN), Land’s End (LE) and Shoe Carnival (SCVL).
Lululemon Stock: Is It A Buy?
An Accumulation/Distribution of A and up/down volume ratio of 2.3 indicate strong demand for shares in recent weeks.
Lululemon stock is back in buy range from a a prior buy point of 386. The breakout was during the week ended July 23 when shares jumped 8.4% in higher volume.
The bottom line: It’s a risky buy now with earnings due Sept. 8. That’s not much time to build a profit cushion. It’s also a risky buy because support at the 10-week line is in question.
Follow Ken Shreve on Twitter @IBD_KShreve for more market analysis and insight.
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