LULU Testing Price Floor: Time to Load Up?
Lululemon Athletica (LULU) should be on your watchlist. Here is why – it is currently trading in the support zone ($159.41 – $176.19), levels from which it has bounced meaningfully before. In the last 10 years, the stock received buying interest at this level 3 times and subsequently went on to generate 65.8% in average peak returns.
| Peak Return | Days to Peak Return | |
|---|---|---|
| 9/6/2019 | 2.4% | 49 |
| 11/4/2019 | 34.2% | 108 |
| 4/8/2020 | 160.8% | 1360 |
But is the price action enough alone? It certainly helps if the fundamentals check out. For LULU Read Buy or Sell LULU Stock to see how convincing this buy opportunity might be.
Here are some quick data points:
- Revenue Growth: 9.4% LTM and 17.6% last 3 year average.
- Cash Generation: Nearly 12.2% free cash flow margin and 23.4% operating margin LTM.
- Recent Revenue Shocks: The minimum annual revenue growth in last 3 years for LULU was 9.4%.
- Valuation: LULU trades at a PE multiple of 13.2
- Opportunity vs S&P: Compared to S&P, you get lower valuation, higher revenue growth, and better operating margins
Lululemon Athletica provides athletic apparel and accessories for women and men through company-operated stores and direct-to-consumer channels across multiple countries worldwide.
| LULU | S&P Median | |
|---|---|---|
| Sector | Consumer Discretionary | – |
| Industry | Apparel, Accessories & Luxury Goods | – |
| PE Ratio | 13.2 | 24.1 |
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| LTM* Revenue Growth | 9.4% | 5.1% |
| 3Y Average Annual Revenue Growth | 17.6% | 5.3% |
| Min Annual Revenue Growth Last 3Y | 9.4% | -0.1% |
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| LTM* Operating Margin | 23.4% | 18.7% |
| 3Y Average Operating Margin | 22.7% | 17.9% |
| LTM* Free Cash Flow Margin | 12.2% | 13.4% |
*LTM: Last Twelve Months
That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
What Is Stock-Specific Risk If The Market Crashes?
That said, Lululemon isn’t immune to big drops. It fell nearly 92% during the Global Financial Crisis, which is a huge hit. More recently, the 2018 correction cut it by about 31%, and the Covid pandemic hit around 47%. Even the inflation shock in 2022 dragged it down roughly 46%. These numbers show that no matter how strong the fundamentals, Lululemon can take big hits when markets sell off hard. Risk is always there.
But the risk is not limited to major market crashes. Stocks fall even when markets are in good shape – think events like earnings, business updates, outlook changes. Read LULU Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.