Lululemon jumps 8% as earnings surpass estimates. Is the stock attractive?

Lululemon Athletica Inc.’s (NASDAQ:LULU) fourth-quarter 2021 results showed why it should be on the investors’ stock list. The stock jumped more than 8% on Wednesday after its EPS in the fourth quarter of $3.37 surpassed estimates of $3.27 and was above $2.58 last year.

The revenue increased to $2.13 billion, compared to $1.73 billion, the same as expected. The athletic apparel company said its revenue in FY22 will range between $7.49 billion to $7.62 billion, surpassing estimates of $7.24 billion. In line with the robust performance and guidance, the board approved a $1 billion buyback.

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Still, together with the strong results, Lululemon’s announcement that it launched women’s sneakers earlier in the month boosted the stock. The news is more reassuring to investors as sneakers provide a more attractive offering than lower-margin footwear.

With the post-earnings stock rise, LULU has now added more than 16% in the month, surpassing Adidas and Nike, which are yet to return 2%.

LULU approaches a resistance after robust quarter results

Wednesday gains took LULU to a high of $374. This was after breaking past resistance of $350, which is now our reference support. From the daily chart, the stock is very bullish and approaching a resistance of $378.

Although the stock could breach the $378 level, we need to wait for a potential retracement before buying as it is currently overbought. The stock can as well be bought if it successfully breaks above $378. The targets are $408 and $439.

Summary

Lululemon’s earnings beat, guidance, and announcement coincide with a strong stock rally. The stock will maintain gains, and potential buys should be considered on a retracement to a support level.

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