Lululemon Athletica Inc. Analysis: Bearish Trend Continues, Earnings Announcement Awaited, 1 month ago

lululemon Technical Analysis

Lululemon Athletica Inc. (Ticker: LULU) closed at $306.78 on June 04, 2024, showing a minor increase of 0.05%. The recent trading range indicates some healthy volatility with a low of $301.34 and a high of $309.28. The stock is currently trading well below its 50-day and 200-day moving averages, which stand at $346.55 and $413.65, respectively. This suggests a bearish trend over the medium to long term.

The Relative Strength Index (RSI14) is quite low at 24, indicating that the stock is in an oversold condition. Additionally, the Moving Average Convergence Divergence (MACD) is -17.36, reinforcing the bearish sentiment.

Given the Average True Range (ATR) of 3.01, the stock is showing moderate daily volatility. For the next trading day, the immediate support level is at $299.735 with resistance at $311.99. Considering the stock's current technical indicators, it may see a slight recovery towards the resistance level, especially with the earnings announcement due on June 05, 2024, after-market hours.

Fundamental Analysis

Lululemon Athletica's current market capitalization is approximately $36.75 billion, and it is trading at a price-to-earnings (P/E) ratio of 24.92, which is relatively moderate within the retail apparel industry. The company’s EPS stands at $12.21, suggestive of strong profitability. However, the stock price has significantly dropped from its year high of $516.39, closer now to its year low of $293.03.

The noteworthy anticipation lies in the earnings report due post-market today. Analysts predict earnings of $2.38 a share on revenue of $2.194 billion. While there are concerns about slowed sales growth and emerging competition from brands like Alo and Vuori, the company maintains a favorable Discounted Cash Flow (DCF) valuation of $359.40, indicating that the stock is currently undervalued.

lululemon In terms of analyst sentiment, the consensus rating is a "Buy," with the majority suggesting that Lululemon has strong long-term growth potential. The price target ranges from $240 to $550, with a median target of $447, which implies significant upside potential from the current price level.

Short-term and Long-term Predictions

For the next trading day, considering the oversold condition as per RSI, there may be a modest rebound. However, any immediate gains are likely to be tempered by investor caution ahead of and immediately following the earnings announcement.

Over the upcoming week, much will depend on the earnings results. If Lululemon meets or exceeds the earnings expectations, we could see a more sustained rally towards the resistance level. Conversely, any negative surprises could lead to further declines, possibly testing the support level of $299.735.

In the long-term, Lululemon's solid fundamentals, coupled with robust analyst targets and the potential for market recovery, underline its intrinsic value. With a PE ratio under 25 and a DCF suggesting undervaluation, the company appears poised for growth, pending successful navigation of current market challenges.

Overall Evaluation

Considering both technical and fundamental analyses, Lululemon Athletica Inc. lands as a 'Hold' candidate. This reflection considers the oversold technical indicators, moderate P/E ratio, and the present undervaluation against the backdrop of upcoming earnings uncertainty and competitive pressures. Investors might benefit from awaiting the Q1 earnings results before making further decisions on their holdings.

Check full lululemon forecast and analysis here.