Athletic apparel and accessories maker Lululemon Athletica ( LULU ) will report its first-quarter numbers on June 8. The company will report its numbers before the market opens, with the consensus calling for earnings of $0.30 per share. The stock is up 27.8% on the year.
LULU was recently trading at $67.06, down $2.67 from its 12-month high and $23.92 above its 12-month low. Technical indicators for LULU are bullish and the stock is in a strong upward trend. The stock has recent support above $62.50 and is trading above recent resistance. Of the 25 analysts who cover the stock, 17 rate it a "strong buy", one rates it a "buy", five rate it a "hold", one rates it a "sell", and one rates rate it a "strong sell". The stock receives S&P Capital IQ's 3 STARS "Hold" ranking.
The entire athletic apparel sector has been solid over the last couple of years, and LULU has been no exception. The "athleisure" fashion trend has benefited companies like LULU and Nike ( NKE ), and that is expected to continue moving forward. The consensus calls for earnings to fall four cents from last year, but the Street's whisper is actually higher at 33 cents, which would be just a penny lower than the same period last year. While earnings are expected to be slightly lower on a year over year basis, Wall Street remains upbeat on the company's business, forecasting full year earnings growth of 15.6% this year, and an additional 18.1% next year. With the stock's big gains so far this year, the P/E has risen to 35.6, so the upside may be limited on an earnings beat, but if earnings are more than a couple pennies above the consensus, the stock could really move higher. With such bullish sentiment by analysts, the stock should move higher on any earnings beat. The company has a very solid record of posting better than expected results, and I expect another such report for the company's recent quarter.
Stock Only Trade
If you are looking for a bullish hedged option trade on LULU, consider a July 50/55 bull-put credit spread for a 35-cent credit. That's a potential 7.5% return (65.4% annualized*) and the stock would have to fall 17.5% to cause a problem.
If you are looking for a bearish hedged option trade on LULU, consider a July 80/85 bear-call credit spread for a 30-cent credit. That's a potential 6.4% return (55.5% annualized*) and the stock would have to climb 19.7% to cause a problem.
Covered Call Trade
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Originally published on InvestorsObserver.com