Thursday, March 25, 2010

lululemon shares way ahead of themselves, but that's not saving the shorts (LULU)


Shares of athletic retailer lululemon (LULU) are screaming higher today, up 11.3% after beating q4 earnings.

The company reported earnings per share of 40cents, versus the 29cents expected, and raised guidance for both the coming quarter and the full year. While the revenue guidance is a big increase, earnings per share guidance lags due to continued investment in the store base. To that effect, earnings for this quarter would have been demonstrably higher, but the company is plowing a LOT of money into its business operations.

The shares - brace yourself - trade for FORTY TIMES this year's expected $1.00 in EPS, part of the reason I once wrote about them using the title lululemon is fairly priced....if it were the year 2014 (LULU).

My 2010 estimates weren't far off, but my estimate of what people would pay for those estimates was low:

The only reason this stock is blasting to 40times 2010 eps estimates is the poor, poor shorts. There are 9.35million shares of LULU sold short, which is almost 14days of average trading volume for this stock.

These results - and the company's future prospects - are fantastic, just remember that they did $58.2million in net income in 2009, and their market value of $2.8billion is 48times that number...

Copyright 2010 AlphaNinja

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