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Has this stock presented a perfect ‘buy the dip’ opportunity?

Has this stock presented a perfect 'buy the dip' opportunity?
Elmaz Sabovic

Investors often rue missing out on early gains from a stock, which can propel it out of their reach. However, ‘buy the dip’ opportunities often offer a second chance for traders. 

Currently, it appears that Lululemon (NASDAQ: LULU) stock is undergoing a retracement on the price chart
Following the recent dip in stock price following the last earnings update for 2023, it’s becoming increasingly difficult to overlook this company, regardless of whether investors align themselves with the growth or value perspective.

Post-earnings dip of LULU stock. Source: Google Finance
Post-earnings dip of LULU stock. Source: Google Finance

Lululemon’s huge potential for growth

Lululemon’s expansion beyond its North American base is remarkably impressive for a company of its size. With the majority of its sales still concentrated in the Americas and China, there remains ample opportunity for further growth.

Lululemon revenue growth in 2023. Source: Lululemon
Lululemon revenue growth in 2023. Source: Lululemon

What’s even more encouraging is Lululemon’s ability to translate its increased sales into even higher growth rates in earnings per share, which surged by 83% to $12.20. 

Adjusted earnings per share, excluding items such as the write-down of the Mirror acquisition for better year-over-year business operating comparability, were up by 27% to $12.77. Regardless of the adjustment, rising profit margins spell good news for shareholders.

Lululemon annual EPS growth. Source: Macrotrends
Lululemon annual EPS growth. Source: Macrotrends

Ambitious outlook for years ahead

Although shares took a hit due to management’s outlook for the upcoming year, it’s crucial to recognize that the previously stated goal of doubling 2021 sales to $12.5 billion by 2026 remains well within reach for Lululemon. 

The company has various strategies at its disposal to achieve this, primarily through expanding into new global regions by gradually opening new stores and expanding its e-commerce presence.

Moreover, despite concerns about a slowdown in revenue growth, Lululemon’s core strength remains robust. Earnings per share are projected to reach at least $14, marking a 15% increase. This projection excludes any positive impact from ongoing share repurchases, with $555 million repurchased in 2023 alone. 

Lululemon’s ambitious outlook and proactive market strategies to gain more market share should inspire confidence among investors. With the recent dip, LULU stock presents an ideal entry opportunity.

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