A Potential Trading Opportunity in Lululemon (LULU) Stock

Lululemon Athletica Inc. (LULU) stock is currently trading within an ascending channel.  A move out of the channel could result in a breakout or a breakdown…  

Lululemon Athletica Inc. (LULU) designs, distributes, and markets athletic apparel and accessories for women, men, and girls. The company offers pants, shorts, tops, and jackets for both leisure and athletic activities such as yoga and running.

The company has performed well in the pandemic due to its strong e-commerce performance. LULU’s direct-to-consumer revenue through its website soared 94% year over year in the third quarter. As the coronavirus restrictions ease, the company is seeing more foot traffic and leveraging its buy online pickup in store and ship-from-store services.

LULU had $482 million in cash as of the end of the last quarter, compared with $635 million in long-term debt. Though the company has a healthy current ratio of 2.2, indicating it has enough liquidity to meet short-term needs. LULU also has strong profitability numbers with a return on equity of 25.8% and ROIC of 21.2%.

The company has a strong history of revenue growth with sales expected to grow by 24.7% next year. Earnings are expected to rise 46.2% next year. Its stock is overvalued through, with a P/E of 82.6 and a Price to Sales ratio of 11.4.

The stock is up over 50% for the year, but has shown bearish short-term momentum. LULU is rated a “Buy” in our POWR Ratings system.

Take a look at the 1-year chart of LULU below with my added notations…

See chart and continue reading at STOCKNEWS.com