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

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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.

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

Source – TradingView

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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