Lululemon Athletica is a Canadian company that has disrupted the technical apparel industry. It has become a leading player in the athleisure industry, which is known for athletic activities like yoga, running, and training.
Lululemon sells its products mostly to women, who account for about 64% of its total sales. It has grown its business internationally in over 25 countries, a trend that it continues to grow.
While Lululemon is a Canadian company, it makes most of its revenue in the United States. It is also growing its business in China, the world’s most populous country.
Its Americas revenue accounts for about 79% of its total revenue, while Mainland China represents about 10%. The Rest of the World accounts for about 11% of total revenue.
Lululemon has grown its business by opening more stores and leveraging technology to grow its market share. A substantial amount of its revenue is coming from e-commerce today.
LULU stock was trading at $391, while the HypeIndex metric rose to 134%.
Find more about the LULU stock here.
Positive hype
LULU’s hype has grown because of the stock’s strong performance as it stock rallied by over 73% from its lowest level this year.
The company published results that were better than estimates. Its revenue rose by 9% to over $2.4 billion in the third quarter. The closely watched comparable store sales rose by 4%, helped by Mainland China.
China’s revenue rose by 39%, while America's net revenue jumped by just 2%. The Rest of World’s revenue rose by 27%.
This revenue growth happened as the number of new company-operated stores increased by 18, with most of them being in Mexico. It ended the quarter with 749 company-operated stores.
Analysts are optimistic about Lululemon’s recovery, with the current quarter’s revenue expected to be $3.52 billion, up by almost 10% from the same quarter last year. Its annual revenue growth is expected to be almost 10% to $10.1 billion.
Lululemon Athletica’s profitability is also expected to continue growing. Analysts expect that the earnings per share will be $5.65, up from $5.29 last quarter. For the year, it is expected to be $14.14, higher than what it made last year.
Analysts believe that Lululemon is fairly valued as it has a trailing and forward P/E ratio of 28 and 25, respectively.
Negative hype
Lululemon’s growth has largely stalled since the company was used to deliver double-digit growth numbers. As such, it has now moved from being a growth stock to a value one.
The company is facing substantial competition from companies like Nike, On Holding, The Gap, and Adidas.
Lululemon’s growth in its most important market in the United States is slowing as consumers look for alternatives.
Lululemon stock price analysis
The daily chart shows that the Lululemon stock price has been in a strong bullish trend after bottoming at $227 in August. It has moved to the 61.8% Fibonacci Retracement level and formed a golden cross chart pattern. A golden cross happens when the 50-day and 200-day moving averages cross each other.
Therefore, the stock will likely continue rising as bulls target the next key resistance level at $500, which is about 28% above the current level.
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