Q: Thoughts on the drop today and whether this is a good entry given analysts apparently going sour on this name. LULU, like NKE, seems to have tremendous brand loyalty.
5i Research Answer:
LULU is slowing its product innovation, and analysts are adjusting earnings downward, fearing slowing growth. The stock is at a four year low. Management has struggled in the past and has always come through, though, and we doubt this time is much different. We think it is quite interesting for a long term recovery play. We can't time the bottom, and do not like negative momentum generally, which it has in spades. But sentiment is so bad any positive news might have an amplified positive impact on the stock. We would be OK starting with a 'little' position and adding into further weakness, slowly.