What’s behind Lululemon’s rising stock price?
As discussed in the previous article, Lululemon Athletica (LULU) stock has soared more than 75% so far this year. Behind the stock’s strong returns are the company’s robust financial performance and an optimistic outlook. Lululemon has posted better-than-expected top-line and bottom-line results over the past five quarters. In the first two quarters, strong results led to strong momentum in the stock price. The stock price rose 9.2% and 16.3% after its 4Q 2017 and 1Q 2018 results.
Earnings per share soared a massive 72% during the first quarter driven by a 25% jump in the top line and a 740-basis-point increase in operating profit. The management also raised the outlook for fiscal 2018, as it expected the encouraging trends to continue into the next quarters.
How has the stock price moved since first-quarter results?
Lululemon’s stock price has soared 32% since its Q1 results at the end of May. Rising demand for athleisurewear, Lululemon’s improving margins, optimism about the new management, a positive outlook for the next year, and a bullish stance from Wall Street have been behind the surging stock price.
Argus analyst John Staszak, who upgraded Lululemon to “buy” from “hold” on August 16, believes that Lululemon has substantial growth potential, especially among stocks in the apparel sector. He also said that the company is likely to benefit from expansion opportunities outside North America and its growing e-commerce business.
What’s expected from Lululemon in the second quarter?
Lululemon plans to report second-quarter results after the market closes tomorrow. Wall Street expects its earnings per share to rise 25.6% YoY (year-over-year) to $0.49, driven by a 14.8% YoY increase in sales to $667 million. We’ll have to wait and see whether the stock will reach new highs or if the earnings could stall its rally.