LULU

At Valuentum, the primary and initial focus of our methodology is centered on calculating the long-term intrinsic value of firms based on a robust discounted cash-flow analysis (click here for a narrated, in-depth presentation on our process). We’ve written in the past about how we’re not fans of speculating on earnings releases, and we think doing so is nothing more than gambling. Lululemon (LULU) reports earnings on Thursday, and its past post-earnings moves have been drastic. After reporting in-line earnings and modest guidance in its last report, the stock fell from $49.70 at the previous close to open at $41.94 after reporting earnings. The stock then proceeded to rally back-up to close at $47.17. That’s a lot of volatility for … Read more

Not surprisingly, Lululemon’s (LULU) weak fourth-quarter guidance, issued previously, was revised upwards Monday, sending shares higher. The company hinted that same store sales would come in the low- to- mid 20%’s (20%+) and that revenue would be be in the range of $358 to $363 million (from $327 to $332 million). Both are staggering increases, and the company also guided earnings to a range of $0.47-$0.49 per share (from $0.40-$0.42). Since the increased ranges aren’t much different from what we had expected, our fair value remains unchanged at $68 per share. We think the increased revenue range reflects the increased likelihood that inventory grew sufficiently to meet burgeoning demand, whereas it had been chasing it all year. Additionally, seasonally-warm weather in the Midwest and Northeast may have helped boost sales of Lululemon … Read more

After a large sell off before the open following its report, investors would assume that Lululemon (LULU) really choked and completely missed the quarter. However, as we all know, the market isn’t always rational, and after taking some time to digest the news, it realized the third quarter wasn’t that bad at all. In fact, the stock is right where it was at Wednesday’s close, after the shares rallied around 12% the same day they got hammered. Revenue “miss” and margin compression caused immediate dump, but there were some positives The headline came out Thursday morning, and it wasn’t exactly what we all expected. For a company that continually crushes estimates, Lululemon’s near meaningless $5 million miss caused panic, in addition to gross margins that … Read more

Since Valuentum identified Netflix (NFLX) as a high flyer with a ridiculous valuation over the summer–and identified the valuation of AMR Corp (AMR), the parent of American Airlines, as practically worthless–we’ve been searching for other good put candidates for our Best Ideas portfolio, which continues to outpace the S&P by nearly 2000 basis points so far this year. We admittedly missed out on Green Mountain Coffee Roasters (GMCR), though we thought the name was anything but safe, and we have steered far away from Under Armour (UA) and LinkedIn (LNKD) on the long side. This brings us to another high flyer, Lululemon (LULU). When you consider both the price action and high short interest over the last several weeks, it looks like many investors are bearish on … Read more

Lululemon: we think shares still have some upside remaining Lululemon (LULU) has been one of the top performing momentum stocks of 2011, with shares already up nearly 80%. Many analysts seem to think LULU is a lemon in itself, and rightfully so. Not many can relate to paying $98 for a pair of yoga pants that look, to the untrained eye, identical to something one could pick up at Target (TGT) for $15. However, while many on the street wait for Lululemon to come crashing down, we think with continued operational excellence and carefully planned growth, shares are worth $68 on a discounted cash flow basis. Like Charlie Munger, Warren Buffett’s legendary partner in crime believes, sometimes you have to … Read more