Lululemon stock price forecast and earnings preview: buy or sell?

Lululemon Athletica (NASDAQ: LULU) stock price has been in a tight range in the past few months. After peaking at $395 on August 11th, the shares retreated to the current $376. In all, LULU shares have jumped by more than 30% from the lowest level this year.

Lululemon earnings preview

Lululemon will be the key retail stock to watch on Thursday as the company delivers its financial results. These earnings are set to provide more color about the state of the athleisure industry.

Analysts believe that Lululemon’s business continued doing well in the last quarter. Precisely, they expect that the company’s revenue jumped to $2.17 billion in Q2 from $2 billion in Q1.

These results will be a major improvement from what the company made in Q2’22. Its revenue at the time came in at over $1.87 billion. 

The most recent results revealed that Lululemon’s business was doing great as the revenue growth came in at 24%. Comparable sales rose by 17% as the number of stores jumped to 662. 

Lululemon, like other retailers, has invested widely in its e-commerce strategy. Digital comparable sales rose by 18%, bringing the total revenue to over $835 million. North America and Greater China sales rose by 17% and 79%. Its net income roared by 54% to $290 million while its cash and investments came in at $951 million.

The main challenge for Lululemon is the ongoing China weakness. Recent economic numbers have shown that the Chinese economy continued struggling, with retail sales slumping. 

This economic slowdown will likely affect discretionary spending among most Chinese who have seen their property values drop. Another challenge is the company’s growth path through store openings. The firm expects to have 50 net new company-operated stores this year.

Another concern is valuation considering that that the firm has a market cap of $47 billion and a TTM PE ratio of 50.  It has a forward PE ratio of 31.57, making it a premium stock to own. However, in the past, LULU has managed to counter the valuation challenge by having robust growth.

Lululemon stock price forecast

The daily chart shows that Lululemon stock price tends to have major moves after earnings. It slumped hard in December when it published its results. The opposite happened when the shares jumped after its results in March and June. 

The stock has found a strong resistance point at $395.19, the highest point in July and August. It has consolidated at the 50-day and 25-day moving averages while the Average True Range (ATR) has risen.

Therefore, the outlook for the stock is neutral with a bullish bias. The key support and resistance levels to watch will be at $360 and $395.