Why Lululemon Stock Sank Like a Rock Today

Shares of athletic apparel company Lululemon Athletica (NASDAQ: LULU) sank on Friday after the company reported financial results for its fiscal fourth quarter of 2023. As of 10 a.m. ET, Lululemon stock was down 17%.

Investors are disappointed today

Lululemon is a fast-growing company, and Wall Street’s expectations are consequently sky-high — expectations that will go unmet in 2024. The company reported its fiscal 2023 numbers yesterday afternoon. But its financial guidance for fiscal 2024 is what’s rattling investors.

Lululemon says it can generate net revenue of $10.7 billion to $10.8 billion in fiscal 2024. This would be growth of 10% to 11%. While double-digit growth is good, analysts had expected something better. Therefore, they’re largely lowering their price targets for Lululemon stock to reflect its slower-than-expected growth.

Are investors seeing the big picture?

I’m surprised that the market is reacting so negatively to the financial results from Lululemon. For its fiscal fourth quarter, the company generated revenue of $3.2 billion. For context, it had just raised its Q4 guidance in January and still wound up beating it with its Q4 report.

Moreover, Lululemon’s guidance for fiscal 2024 still represents a solid growth rate. And the company is also guiding for diluted earnings per share (EPS) of at least $14. This represents an impressive 15% year-over-year increase.

In short, consumer demand is still strong for Lululemon’s products, and its profits are expected to grow faster than revenue. I recently said that Lululemon stock would be a better buy in the event of a pullback. I think that opportunistic pullback came today for those who have been watching this stock from the sidelines.

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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica. The Motley Fool has a disclosure policy.

Why Lululemon Stock Sank Like a Rock Today was originally published by The Motley Fool