LULU Is No Longer My No. 1 Stock Pick – Here’s Why

The fourth-quarter earnings season is coming to a close soon, but there was still a flurry of earnings reports released this week. One such company was Lululemon Athletica (NASDAQ:LULU), which released its earnings results for its fourth quarter in fiscal year 2021 on Tuesday. All in all, the results were mixed: Lululemon posted earnings of $3.28 per share on revenue of $2.129 billion.

the lululemon (LULU) logo on a mosaic-style wall

Source: Richard Frazier / Shutterstock.com

However, the company still gained year-over-year for both earnings and revenue, climbing 27% and 23% respectively. “We are proud that we passed the $6 billion in annual revenue milestone for the first time,” CEO Calvin McDonald said of the earnings report. “We are entering the new year from a position of strength, which we’ll build upon to continue delivering for our guests and shareholders in the years to come.”

Analysts were expecting earnings of $3.27 per share on revenue of $2.135 billion, so the “athleisure” wear retailer posted a slight earnings surprise and a slight revenue miss.

For the first quarter in fiscal year 2022, the company expects earnings of $1.38 to $1.43 on revenue in the range of $1.525-$1.550 billion. For fiscal year 2022, LULU anticipates net revenue to be between $7.490 billion-$7.615 billion, 20% to 22% growth year-over-year. Earnings per share are expected to be between $9.15-$9.35 for the year 2022.

The strong guidance was enough to trigger a nice post-earnings pop in LULU shares.

Now, I want to discuss Lululemon with you today because I was a big fan of the company a few years ago. LULU had been steadily growing its sales and earnings in 2018, and I expected its momentum to continue in 2019. I was so bullish on the company that I picked it as my stock for the InvestorPlace 10 Best Stocks for 2019 contest. The stock climbed 91% that year… and I walked away as the winner of the contest.

Take a look and see how it performed in the chart below.

So, it might surprise you to hear that I am not nearly as bullish on the stock today as I was in 2019, despite the fact that Lululemon was a popular COVID-19 pandemic stock.

In fact, if you take a look below at my Report Card for LULU, you can see that it earns a “C” rating. So, the stock is a “Hold” right now. In other words, it was a stock worth holding into its earnings report, but not one an investor should be snapping up more shares of right now.

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Once you’ve signed up, I’ll send you my special report 13 Stocks to Sell Immediately — absolutely free. (No. 6 may surprise you.)

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I’ll be back in touch tomorrow with a special sector review of the big banks, so stay tuned!

The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

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