Why Lululemon Stock Is Up By 8% Today

Key Insights

• Lululemon’s quarterly earnings beat analyst estimates.
• The company’s board approved a $1 billion stock buyback plan.
• The stock’s rich valuation remains the key concern for traders.

Lululemon Stock Rallies After Strong Quarterly Report

Shares of Lululemon gained strong upside momentum after the company released its quarterly results. Lululemon reported revenue of $2.13 billion and adjusted earnings of $3.37 per share, meeting analyst estimates on revenue and beating them on earnings.

The company noted that its comparable store sales increased by 32% on a year-over-year basis, while direct-to-consumer net revenue grew by 17%.

As Lululemon’s performance was strong, the company’s board of directors approved a new stock repurchase program of up to $1.0 billion worth of Lululemon shares.

In the first quarter of 2022, Lululemon expects to report revenue of $1.525 billion – $1.55 billion. First-quarter earnings are expected at $1.38 – $1.43 per share.

What’s Next For Lululemon Stock?

Analysts expect that Lululemon will report earnings of $9.06 per share in the current fiscal year, so the stock is trading at more than 40 forward P/E.

It should be noted that analyst estimates for Lululemon stock have been moving lower in recent weeks, but this trend may change after the release of the strong earnings report.

In case analyst estimates start to move higher, Lululemon stock may get more support. The buyback announcement should also provide additional support to Lululemon stock.

In the longer term, the key question is whether the market is ready to tolerate valuations above 40 forward P/E at a time when Treasury yields are rising fast. At this point, the market is enthusiastic despite rising yields and geopolitical tensions, but it remains to be seen whether traders will stay bullish when the Fed begins to reduce the size of its balance sheet.

Lululemon stock has already managed to get from the $280 level to the $370 level in just two weeks, so the risks of a pullback are increasing as some traders would like to take some profits off the table after the strong rally.

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