Lululemon stock underperforms despite positive earnings
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Lululemon Athletica Inc. (LULU), a leading Vancouver-based athletic apparel company, has faced considerable stock performance challenges, significantly underperforming the Consumer Discretionary sector. With a market capitalization of $38.9 billion, Lululemon remains a prominent large-cap player in activewear, known for its innovation and product comfort.
Despite its strong brand recognition, LULU stock has experienced a notable downturn, declining 34.2% from its 52-week high reached in March 2024. Over the past three months, the stock dropped 18.7%, underperforming the Consumer Discretionary Select Sector SPDR Fund (XLY), which declined by 15.8% in the same period. The stock’s longer-term outlook remains challenging, with a 32% decrease over the past year, starkly contrasting the sector’s 8.9% gain.
Technically, LULU's recent performance indicates ongoing bearish momentum, consistently trading below its 20-day moving average since mid-February, with its 200-day moving average continuing a downward trajectory.
Despite these market struggles, Lululemon reported robust third-quarter results, triggering a brief rally. Driven by substantial international growth of 33% and a modest 2% sales increase in the Americas, the company's total revenue rose 8.7% year-over-year to $2.4 billion, surpassing market expectations. Operational efficiency improved significantly, leading to a substantial 18.9% increase in adjusted operating income. Additionally, the company raised its Q4 revenue guidance to a range of $3.56 billion–$3.58 billion and revised EPS guidance upwards, reflecting solid underlying business strength.
Nevertheless, when compared to its peer Adidas AG (ADDYY), Lululemon has notably lagged behind, with Adidas shares appreciating by 14.1% over the past year.
Analysts maintain a cautiously optimistic view on Lululemon, providing a consensus “Moderate Buy” rating. The stock’s average target price of $409.97 implies a potential upside of 29.5%, suggesting opportunities exist for investors who closely monitor the company's strategic execution and market conditions.
Despite its strong brand recognition, LULU stock has experienced a notable downturn, declining 34.2% from its 52-week high reached in March 2024. Over the past three months, the stock dropped 18.7%, underperforming the Consumer Discretionary Select Sector SPDR Fund (XLY), which declined by 15.8% in the same period. The stock’s longer-term outlook remains challenging, with a 32% decrease over the past year, starkly contrasting the sector’s 8.9% gain.
Technically, LULU's recent performance indicates ongoing bearish momentum, consistently trading below its 20-day moving average since mid-February, with its 200-day moving average continuing a downward trajectory.
Despite these market struggles, Lululemon reported robust third-quarter results, triggering a brief rally. Driven by substantial international growth of 33% and a modest 2% sales increase in the Americas, the company's total revenue rose 8.7% year-over-year to $2.4 billion, surpassing market expectations. Operational efficiency improved significantly, leading to a substantial 18.9% increase in adjusted operating income. Additionally, the company raised its Q4 revenue guidance to a range of $3.56 billion–$3.58 billion and revised EPS guidance upwards, reflecting solid underlying business strength.
Nevertheless, when compared to its peer Adidas AG (ADDYY), Lululemon has notably lagged behind, with Adidas shares appreciating by 14.1% over the past year.
Analysts maintain a cautiously optimistic view on Lululemon, providing a consensus “Moderate Buy” rating. The stock’s average target price of $409.97 implies a potential upside of 29.5%, suggesting opportunities exist for investors who closely monitor the company's strategic execution and market conditions.