To The Moon

$Lululemon Athletica(LULU)$ is expected to release earnings on 07 Dec 2023 after market close.

Market expects Lululemon to post EPS of $2.28, implying a rise of 14%, while revenue is expected to rise 17.7% to $2.19 billion.

Over the last two years, Lululemon has beaten EPS and revenue estimates 88% of the time. There was a craze for Lululemon athleisure clothing during the pandemic. Lululemon also faced issues of closed stores and supply chain issues causing delayed deliveries.

One thing to note is that Lululemon managed to quickly recover from these issues by new product launches and a loyal customer base snapping up its yoga pants and shorts.

In early August this year, Lululemon had seen a rebound in China sales and strong performance in North America even as discretionary spending remained slow. This prompted Lululemon to raise its annual revenue and profit outlook for the second time.

Lululemon (LULU) Earnings Historical

Lululemon shares gained +6.0% the day following the earnings announcement on 31 August to close at 404.19. Following its earnings release, 97 days ago, LULU stock has drifted +14.0% higher.

From the time it announced earnings, LULU traded in a range between 354.66 and 467.63. The last price (460.67) is closer to the higher end of range.

There is a nice price effect of +6.0% with an implied straddle of 7.7%, this might signal some upside if Lululemon has managed to benefit from the increased sales in China and North America.

Lululemon (LULU) Upcoming Earnings Guidance

Lululemon has issued earnings guidance for Q3 2023. EPS estimate in the range of 2.23 to 2.28, which would be a 13% increase from the same period last year.

Revenue estimate in the range of 2.165 B to 2.19 B, which would be a 17% increase from the same period last year. Revenue Growth estimate in the range of 17.0% to 18.0%.

There have been positive price effect when Lululemon post surprises in their revenues and earning per share.

Lululemon (LULU) Historical Moves Ahead of Earnings

LULU stock had mixed performance leading up to earnings. Shares of Lululemon Athletica traded lower, on average, in the one week periods heading into an earnings report. The best performance was two weeks ahead of earnings for an average gain of 0.7%

Lululemon (LULU) Historical Stock Price Reaction to Earnings

LULU shares have moved higher in the immediate aftermath of earnings 7 out of 12 previous reports. On average the stock moved up 3.0% in the first day of trading after the company reported earnings.

Lululemon (LULU) Stock Behavior After Earnings

Based on the previous 12 earnings releases, LULU is more likely to trade lower 1 day after earnings for an average loss of -0.1%

Lululemon (LULU) Post Earnings Announcement Drift

LULU share price has drifted up 14.0% post earnings announcement. Using the last 12 quarters data, the average drift between earnings announcements is -0.1%. The current drift represents a positive 1.1 standard deviation move.

• Current post earnings announcement drift: 14.0%

• Historical average post earnings announcement drift: -0.1%

• Historical post earnings drift standard deviation move: ±12.2%

Lululemon (LULU) Post Earnings Movement

The options market overestimated LULU stocks earnings move 50% of the time in the last 12 quarters. The predicted move after earnings announcement was ±7.3% on average vs an average of the actual earnings moves of 7.1% (in absolute terms).

Lululemon (LULU) Earnings Implied Volatility Crush

LULU's last earnings implied volatility (IV30) going into earnings was 43.6. The last time LULU released earnings, the implied volatility dropped to 23.4, resulting in an implied volatility crush of 46%. 5 days after earnings, the 30 day IV was 21.2.

• Average Implied Volatility Crush For LULU Earnings: 28%

• Average 30 Day Implied Volatility 1 Day Before Earnings: 48.0

• Average LULU 30 Day IV for the Day of Earnings: 34.4

• Average 30 Day Implied Volatility 5 Days After Earnings: 32.8

Lululemon (LULU) IV Percentile Rank

LULU implied volatility (IV) is 38.1, which is in the 67% percentile rank. This means that 67% of the time the IV was lower in the last year than the current level.

The current IV (38.1) is 1.3% above its 20 day moving average (37.6) indicating implied volatility is trending higher.

Lululemon (LULU) IV vs 20-Day HV

The current IV (38.1) in LULU is 45.3% above its 20 day HV (26.2) suggesting that options markets are predicting future volatility to trade above the most recent 20 day realized volatility.

Lululemon (LULU) Seasonal Volatility by Day of Year

Historically, implied volatility for LULU tended to rise the most in November with a median IV Of 46.5, while July tended to be when implied volatility declined To its lowest levels With median IV Of 27.6.

Historically, the median IV for the current month of December was 42.7 compared to the current IV of 38.1. The IV level in January following December tended to be lower, with a median IV of 36.0

Lululemon (LULU) Volatility Skew

The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls.

The current skew indicator is showing bullish signal.

The implied volatility for downside puts is increasing relative to upside calls, then that suggests the market is pricing in a larger fear to a downside move.

Summary

Based on the data I have gathered, Lululemon would benefit from the sales from China and North America with their new products launches, I would expect to see a better-than-expected revenues.

As what Lululemon price effect will move positively upon EPS and revenue surprise, I foresee a bullish upside from Lululemon share price post earnings.

Appreciate if you could share your thoughts in the comment section whether you think Lululemon would enjoy an upside if it post a surprise for both EPS and earnings?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.