Lululemon is at a proper buy point of 406.94 in a flat base ahead of its third-quarter earnings report. LULU stock is Monday's selection for IBD 50 Stocks To Watch.
When LULU joined the S&P 500 on Oct. 16, shares gapped up and broke out as they rebounded from the 50-day moving average, according to IBD MarketSmith pattern recognition tools. They then pulled back to the 50-day line before approaching the buy point again. LULU stock has outperformed the S&P 500 with a 27% gain so far this year, compared with the index's 13% gain.
LULU has a set of strong technical ratings going for it. The company's Composite Rating of 97 and EPS Rating at 98 are near-perfect scores, while its Relative Strength Rating of 91 is not far behind.
Over the past seven quarters, sales growth has ranged from 18% to 32% while earnings have grown between 22% to 54%. The athletic apparel maker saw sales jump by 18% to $2.2 million in the second quarter as comparable sales increased 11%.
Earnings of $2.68 per share rose 22% from the prior-year quarter. Its third-quarter outlook includes 18% sales growth and midpoint earnings growth of 13%. The company opened a net 10 new company-operated stores during the second quarter.
In September, Lululemon entered into a five- year partnership with Peloton. Peloton will be the exclusive provider of digital content for Lululemon and, in turn, Lululemon will be the primary athletic apparel partner for Peloton. Lululemon Studio subscribers will have access to Peloton classes as well.
LULU Stock Ranks Second In Group
Lululemon designs and sells athletic apparel such as performance attire and footwear and accessories for various activities such as running, training and yoga. The company also offers a fitness-at-home suite through Lululemon Studio's interactive live and on-demand classes.
Based in Redwood City, Calif., Lululemon has more than 670 stores with 19 company-owned locations. The company also has an e-commerce segment and operates several outlets, plus it sells to select wholesale businesses.
LULU stock ranks second in the retail apparel group. Mutual funds own 60% of outstanding shares, and more fund managers have bought LULU stock in the past two quarters. Among top funds, the Fidelity Contrafund (FCNTX) and MFS Growth Fund (MFEGX) hold shares of LULU.
Exchange traded funds hold shares of LULU as well. The Consumer Discretionary Select Sector SPDR ETF and the iShares MSCI USA Quality Factor ETF hold shares of LULU.
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