To The Moon

$Lululemon Athletica(LULU)$ is scheduled to report its quarterly earnings on 29 Aug after market close. Market is expecting Lululemon (LULU) to earn an adjusted profit of $2.94 per share on $2.41B in revenue for Q2.

For Q3, estimates are for a profit of $2.73 per share on $2.41B in revenue, and for FY25 EPS of $14.01 on $10.62 Billion in revenue.

Strong Cash Flow Generation In Focus

if we were to look at how the number is going to play out for LULU, it will not be any surprise, but I think what investors would be focusing would be the compelling growth opportunities, “exceptionally” strong cash flow generation, and “fortress” balance sheet.

Based on what we have so far, LULU has quite an impressive free cash flow considering that it has managed to gather from 228 million to more than 1 billion from 2023 quarter to 2024 quarter.

But we saw a decline in the April quarter, so this quarter would be interesting as we wanted to know if LULU would be able to make a surprise in the free cash flow again.

Concern Of Consumer Discretionary Sectors Not Performing

The S&P 500 consumer discretionary was second last from yesterday reading, this show that investors are avoiding stocks in this sector. So LULU might not be in the scope of investors interest.

And there is also concern of whether consumer spending would really return with the hope of rate cut, given that there are some economic data that might derail the decision.

Can LULU revenue perform like Nike?

We have seen Nike gather a more than 400% in its revenue difference, but would LULU be on the same page, I would doubt so, considering that LULU products are facing challenges from China cheaper options, with better quality.

Given that consumer are still cautious before the actual rate cuts, I would think we could see a low sales number from LULU, so I would not be hopping for any surprise.

Lululemon (LULU) Price Target Forecast

Based on 24 Wall Street analysts offering 12 month price targets for Lululemon Athletica in the last 3 months. The average price target is $340.17 with a high forecast of $445.00 and a low forecast of $220.00. The average price target represents a 31.43% change from the last price of $258.83.

Lululemon (LULU) Year-To-Date Returns

Investors are still concerned of the more than 40% loss in stock price year-to-date, with the competition from china lower and better quality high end sports apparels, we could see LULU continue to face challenges and expenses would go up in terms of promoting the brand.

Consumer spending have still been cautious, so consumers are still looking out for alternaitves.

Lululemon (LULU) Technical (MACD and KDJ)

Though MACD present a potential upside with LULU trading sideway now, the KDJ has shown quite a clear signal that LULU stock price is going to experience a downward move.

I am expecting LULU to lose between 3% to 5% after its earnings result.

Summary

Based on what we have seen so far from past LULU performance, it has not been able to come back after losing 40% of its stock price. Investors confidence is yet to be seen coming back.

LULU need to show an exceptionally impressive revenue improvement, and what I would focus is the free cash flow, will this time be another larger negative?

Appreciate if you could share your thoughts in the comment section whether you think LULU would be able to turn around with better revenue earnings?

@TigerStars @Daily_Discussion @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.