Lululemon Jumps on Earnings Beat, is Further Growth on the Horizon?

$Lululemon Athletica (LULU.US)$, the renowned athletic apparel retailer, has reported earnings of $2.54 per share, exceeding the analysts' expectation of $2.39. Compared to the previous year's earnings of $2.28 per share, this represents an 11.4% growth. The quarterly sales of $2.21 billion which beat the analyst consensus estimate of $2.20 billion. This is a 10.39% increase over sales of $2.00 billion the same period last year. Following the earnings announcement, Lululemon announced a $1 billion increase to its share repurchase program. Its stock experienced a notable 10% jump during post-market trading.

Since the start of 2024, LULU has been on a downward trend that diverges from the broader market. As of June 5, 2024, LULU had fallen by 39.71%, in stark contrast to the 12.25% increase observed in the S&P 500.

Lululemon Jumps on Earnings Beat, is Further Growth on the Horizon?

After a sharp pullback, is it a good time to watch Lululemon?

While Lululemon's immediate financial performance is robust, there is a growing worry that consumer preferences may be transitioning away from athleisure towards traditional denim, posing a risk to Lululemon's core business. Analysts and the market remain cautious due to ongoing inventory issues, a slowdown in the Americas, and broader consumer trend uncertainties.

With almost a 40% drop in stock price year-to-date, investors are focusing on the future movement of Lulu. How can we better track Lululemon's future movements? The Bollinger Bands are technical analysis tools often used in short-term trading. It comprises an upper band, a middle band, and a lower band, forming a channel around the stock price movement.

In general, the closer the stock price is to the upper band, the more "overbought" the market; the closer the stock price is to the lower band, the more "oversold" the market. In addition, the price breaking the lower band means a higher possibility of a raise.

Based on Lulu's chart, there's a noticeable crossover where the price (represented by the green line) has surpassed the lower band (indicated by the blue line). This crossover suggests an oversold condition, which has been followed by a resurgence of buying power from the buyer side. The increased buying activity appears to be countering the selling sentiment, leading to an upward movement in its price.

Why share repurchase matters？

From other perspectives, Lululemon has recently disclosed an expansion of its share repurchase program by $1 billion. This action typically occurs when the company believes its stock is undervalued in the market. By buying back its shares, the company aims to boost the stock price, which can be seen as a positive sign for investors.

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