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Buy Beaten-Down Lululemon Stock Before Q1 Earnings?

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On today’s episode of Full Court Finance at Zacks we dive into the improving earnings picture for the second quarter and beyond, while also looking at the market more broadly. The episode then breaks down Lululemon (LULU - Free Report) ahead of its first quarter FY21 earnings release to help investors decide if they should consider buying the slumping athleisure stock.

Wall Street has seemingly shaken off the inflation worries for the moment, with the Nasdaq trading above its 50-day moving average and the S&P 500 back within touching distance of its records. Clearly, investors need to stay vigilant about rising prices and what the Fed might do in response. But even if rates rise, yields could remain historically low, which likely extends TINA investing.

Inflation fears aside, there appear to be plenty of reasons for the overall bullish outlook to remain in place. This includes the vaccine-boosted economic comeback and the continually improving earnings picture (also read: Previewing Q2 Earnings Season).

This brings us to Lululemon. The stock has soared 375% in the last five years to blow away the apparel market’s 100%, Nike’s (NKE - Free Report) 160%, and the benchmark index’s 130% climb. The athleisure standout turned sportswear powerhouse soared off the coronavirus lows last year as well, as Wall Street praised its e-commerce growth.

But Lululemon shares have fallen by nearly 20% since early September as investors took a step back from the somewhat overheated stock in favor of cyclical sectors and reopening plays within the apparel space such as Levi (LEVI - Free Report) .

Despite the pullback, the company’s growth outlook and fundamentals remain strong as it continues to expand beyond yoga pants to force everyone from Gap (GPS - Free Report) to Target (TGT - Free Report) to start their own athleisure brands. The company has even entered the home fitness market alongside Peloton (PTON - Free Report) and many others, including Apple (AAPL - Free Report) .

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