Lululemon Stock Soars to Fresh Highs After Strong Q4

Lululemon Athletica Inc. (LULU) shares rose more than 15% during Thursday's session after the retailer reported strong fourth quarter financial results after the bell on Wednesday. Revenue rose 26% to $1.17 billion, beating consensus estimates by $20 million, and non-GAAP earnings per share reached $1.85, beating consensus estimates by 10 cents per share. Comparable sales also rose 17%, surpassing consensus estimates calling for a 16.6% gain for the quarter.

The company expects to see these growth rates continue over the coming year. In fiscal year 2020, Lululemon anticipates revenue of between $3.7 billion and $3.74 billion, which was higher than consensus estimates of $3.71 billion. Earnings per share are expected to be between $4.48 and $4.55, which compares favorably to the $4.40 consensus estimate.

Analysts were largely bullish on the stock following the earnings report. Oppenheimer and Credit Suisse analysts both increased their price targets to $190, and JPMorgan analysts believe that the stock could move even higher with a price target of $197. However, Jefferies analysts believe that Lululemon shares already reflect much of the upside and remain more cautious.

From a technical standpoint, the stock broke out from multiple resistance levels to fresh all-time highs. The relative strength index (RSI) moved into overbought territory with a reading of 71.95, but the moving average convergence divergence (MACD) experienced a bullish crossover. These indicators suggest that the stock could see some consolidation ahead, but the intermediate-term trend remains bullish.

Traders should watch for some consolidation above prior highs and R2 resistance at around $166.33 over the coming sessions. After some profit taking, the stock could resume its uptrend toward analyst price targets of around $190. If the stock breaks down from support, traders could see a move to reaction highs and R1 resistance at $158.37 or the pivot point at $150.72, although that scenario seems less likely to occur.

The author holds no position in the stock(s) mentioned except through passively managed index funds.