Lululemon, up 118% in 1 year, could have more room to run

Earnings


Athleisure manufacturer Lululemon reports quarterly earnings next Thursday, and the options market is implying a relatively tame move on earnings after a mammoth run in recent months.

Shares of Lululemon, up 118 percent in one year and 35 percent in 2018, is among a number of specialty retailers on a tear this year. Shares of Ralph Lauren, Tiffany and Urban Outfitters have gained a respective 30 percent, 21 percent and 20 percent n 2018.

Stacey Gilbert, head of derivative strategy at Susquehanna, told CNBC’s “Trading Nation” Lululemon is expecting a relatively small move on earnings this quarter. Gilbert explains.

• Options are pricing in a move of around 8 percent in either direction around earnings, a touch below what the stock has realized over the past eight quarters, though in line with what it’s done over the past four quarters.

• Given the 35 percent rise this year, Susquehanna prefers buying call options rather than the stock outright.

• Susquehanna carries a positive rating on Lululemon shares, and the firm sees the momentum continuing.

Disclosure: Susquehanna is a market maker in Lululemon.

Bottom line: Shares of Lululemon are expected to see a move of around 8 percent following its earnings report next week, according to Gilbert.



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