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Lululemon Athletica Inc. Message Board

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  • techstrategy techstrategy Jul 21, 2011 8:27 AM Flag

    Most of you don't understand

    Seth:

    Be intellectually honest. It was a serious embarrassment. If a company makes claims about its product that cannot be substantiated, it does hurt its credibility and brand. I am sure they are kicking some tail behind the scenes. But, one gotcha story is not going to do it. The bigger issue here is that LULU and Under Armour are both in a MASSIVE bubble. Look at NKE's share price over time. I challenge you. You will see that after its 1997 run, it dropped by half and didn't recover until 2006.

    It's one thing for you to hold this stock. But, any NON-NEGLIGENT growth fund manager needs to be selling. The PEG is over 2 and the macroeconomic downside risks are HUGE. I can already see the class action lawsuits flying if these momo stocks tank and the fund managers choose to play squeeze the short rather than take profits...

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    • seth_london@rocketmail.com seth_london Jul 21, 2011 8:43 AM Flag

      If lulu is able to sustain 40% revenue growth their P/E in two hears is only a little more than half what it is now. I think if the P/E is going to drop, it's going to happen organically as P/E increases...I really don't think a dump is going to happen

      • 2 Replies to seth_london
      • Look at what happened to Google. It's earnings continued to increase. P/E dropped more than that to reduce market cap big time.

        Furthermore, we are entering a future with P/E compression across the board. Sovereign debt crisis is causing risk to be repriced. It effectively increased the discount rate and reduced the multiples people are willing to play. Growth companies are still riding the QE2 bubble.

        In terms of the 40% growth, look at the jobs number. We are running out of gas. LULU is a high end apparel maker, so it is LESS sensitive to the macroeconomy, but nonetheless strongly correlated. As growth stalls, LULU will stall. If growth ceases, the multiple instantly drops to 30 and you lose 50% of your value... Again, look at Google for a historical reference of a company enjoying similar multiples and bubble dynamics...

      • seth_london@rocketmail.com seth_london Jul 21, 2011 8:44 AM Flag

        Going to happen organically as their EPS***** increases (not P/E)

 
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