PreMarket Prep Stock Of The Day: Lululemon

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

In what has been a light week for earnings, there was one significant report from one of the nation's top retailers, Lululemon Athletica Inc LULU after the close Thursday.

Lululemon's Q4 Beat Not Good Enough In Volatile Market

It was an all-around solid report, with Lululemon posting a fourth-quarter EPS beat of 4 cents along with a slight sales beat. The fourth-quarter comps were 20% higher year-over-year.

This marks the 12th consecutive quarter Lululemon has beat on both measures, going back to the first quarter of 2017. 

Lululemon's Excellent 2019 Continued Into February

After nearly doubling in 2019 ($121.61 to $231.67), Lululemon went on make its all-time high in February at $266.20.

As the market began to tumble, so did shares of this issue. It exhibited strong relative performance, bottoming out March 18 at $128.85, within striking distance of its year-end 2018 close, as opposed to Monday, when the broad market finally found a bottom. 

In Monday’s volatile session, Lululemon found support way ahead of the low for the move, reaching $165.05 and ending the session in the green by $7.29 at $172.30.

Lululemon Price Action Since The Low Of Move

Lululemon fully participated in Tuesday’s rally, adding $20.44 to $$192.74 and added just under a $1 in Wednesday’s session. On Thursday ahead of the quarterly report, it peaked at $202.84 and backed off to end the session at $200.80.

In view of its $74 rally off the recent low, it would have taken a huge beat keep Luluelemon's momentum going to the upside. Keep in mind that any investor that picked up shares of the issue since March 12 was sitting on a nice profit.

After a lower open Friday, it sliced through Thursday’s low ($189.05), falling to $184.06 and reversed course. It went on to make a new high at $195.55 and backed off.

The stock was down 6.05% at $188.66 at the time of publication. 

Lululemon Moving Forward

Taking into account that many people are not leaving their homes, let along going shopping for clothes, it is hard to conjure a strong forecast for retailers who aren't selling necessities. 

It may not stop people from buying online, but will crimp brick-and-mortar retailers that still have to pay rent.  

Since many citizens have lost their jobs or have experienced salary cuts, there is a good chance that they will have less disposable income to spend on items such as clothes. With the company being a higher-end retailer, Lululemon may suffer more. 

For those optimistic about a quick resolution to the crisis, they may consider purchasing shares on a retreat. One potential area of support would a 50% retracement of the recent rally ($165.85), which coincides with Monday’s low of $165.05.

Public domain photo via Wikimedia.