An Opportunity To Buy The Dip: Lululemon Athletica Shares Get Slapped After The Company Beats On Earnings And Revenue

Stock Gets Slapped After A Double Beat

Shares of Lululemon Athletica, Inc. LULU closed down15.8% on Friday, after the company beat on both top and bottom lines after the close yesterday. The company's earnings per share of $5.29 beat by $0.26, and its revenue of $3.21 billion beat by $10 million. Ostensibly, the stock was down because the company released weaker-than-expected guidance for the year, but one of the top retail analysts I follow, Jeff Mackey, felt the market was overreacting when LULU was down about 12% after hours on Thursday.

Lulu's guide isn't as bad as it sounds. "Guiding q1 Rev higer" > "Calling US consumers slow" Says in the Q&A that the US is "a little soft" compared to Canada(!) and the rest of the world. Conversion down slightly cc @ericjackson pic.twitter.com/x3xoVNs7Nr

— Jeff Macke (@JeffMacke) March 21, 2024

Chartmill gives the company a good (7 out of 10) overall fundamental rating, and even higher ratings for profitability (9), growth (8), and health (9). Lululemon also has a Piotroski F-Score of 8 (out of 9) indicating financial strength and lack of dilution. 

Taking Advantage Of The Drop

With all that in mind, Lululemon looks like a buy here. If it just recoups some of its Friday losses between now and its next earnings report, you could could be up 10% or more by then if you buy the stock here. In the Portfolio Armor trading Substack, we placed an options trade that could generate a gain of more than 200% if the stock is up 12% in the next three months. You can read about it here. 

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