Editor’s note: This article is a part of InvestorPlace.com’s Best Stocks for 2019 contest. Louis Navellier’s pick for the contest is Lululemon Athletica (NASDAQ:LULU).
With a new year comes a new Best Stocks contest pick, and for 2019, my money is on Lululemon Athletica (NASDAQ:LULU).
You might find it silly that I’m recommending a yoga pants company. But I encourage you to hear me out, because Lululemon is so much more than just a yoga pants company.
The Story of LULU Stock
Over the past two decades, Lululemon has led the athleisure fashion movement. The company was founded in 1998 by Chip Wilson, who spent the prior 20 years working in the surf, ski and skatewear industries. Lululemon started as a design studio by day and yoga studio at night in Vancouver, Canada. And that became the company’s first standalone store in 2000.
Initially, LULU grew by word of mouth, through brand ambassadors and pop-up shops in yoga studios. Now, the company has more than 400 stores across four continents. And for workout buffs who are too busy to drive to their nearest store, there are multiple Lululemon e-commerce sites and mobile apps.
Even as it has grown its global footprint and customer base, Lululemon has kept true to its founding values. It differentiates itself by making some of the highest-quality and most-comfortable workout clothing that money can buy.
In fact, it has a research and development lab that devotes time to examining the human sense of touch. This commitment to comfortable clothes has helped LULU stock expand into the lucrative “comfort” and lifestyle” niche.
Meanwhile, Lululemon maintains a strong presence in its local communities, offering free workshops and yoga classes in its stores. Each week, Lululemon stores and showrooms are transformed into an instant yoga studio. And the company offers free yoga videos online.
Now, I’m not recommending LULU stock because it made yoga pants mainstream. Rather, the company is expanding into mass sports distribution and capturing market share from big-name athletic apparel companies like Nike (NYSE:NKE) and Under Armour (NYSE:UA, NYSE:UAA).
And that expansion is reflected in Lululemon’s top and bottom lines.
The company’s third quarter was a strong one. Earnings of 75 cents per share topped the consensus estimate, which called for 70 cents per share. This represented a 7.1% earnings surprise, and it was also well above the 43 cents per share earned a year ago. Revenue increased 21% year-over-year to $748 million. This was also above expectations for $737.5 million. Same-store sales increased 18%, also above the expected 13.9%.
Looking forward to the fourth quarter, LULU stock is expecting earnings of $1.64 per share to $1.73 per share on revenue of $1.1 billion. That represents 23.3% to 25.6% annual earnings growth and 21% annual sales growth. Analysts have also upped their earnings per share estimates by 3%, which means a quarterly earnings surprise is likely. Overall, Lululemon could find that first place in the Best Stocks for 2019 contest is a perfect fit.
Now, I should also add that LULU has pulled back from its all-time highs set in September. But given the company’s plan for expansion and underlying strong fundamentals, I view this dip as a good buying opportunity. Look for LULU to head higher in the new year.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.