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Weakness Seen in Lululemon Athletica (LULU) Estimates: Should You Stay Away? - Tale of the Tape

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is Lululemon Athletica Inc. (NASDAQ: LULU) which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A  Zacks Rank #4 (Sell) further confirms weakness in LULU.  

A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 22 estimates moving down in the past 30 days, compared with no upward revisions. This trend has caused the consensus estimate to trend lower, going from $2.15 a share a month ago to its current level of $1.88.

Also, for the current quarter, Lululemon Athletica has seen 18 downward estimate revisions versus no revisions in the opposite direction, dragging the consensus estimate down to 32 cents a share from 38 cents over the past 30 days.    

The stock also has seen some pretty dismal trading lately, as the share price has dropped 16.0% in the past month.

So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don't have a long time horizon to wait.

If you are still interested in the consumer goods sector, you may instead consider some better-ranked stocks including American Apparel, Inc. (AMEX:APP), Foot Locker, Inc. (NYSE: FL) and Herbalife Ltd. (NYSE: HLF).  All these stocks carry a Zacks Rank #2 (Buy) and may be better selections at this time.  

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AMER APPAREL (AMEX:APP): Free Stock Analysis Report
 
FOOT LOCKER INC (NYSE: FL): Free Stock Analysis Report
 
HERBALIFE LTD (NYSE: HLF): Free Stock Analysis Report
 
LULULEMON ATHLT (NASDAQ: LULU): Free Stock Analysis Report
 
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The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

 

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