Lululemon Athletica inc. (LULU), The Gap Inc. (GPS): Why’d This Stock Crash on Good News?

Like The Gap Inc. (NYSE:GPS), with TJX Companies, Inc. (NYSE:TJX) you’re getting solid growth at a much more reasonable price than Lululemon offers. And TJX Companies, Inc. (NYSE:TJX) is the leader amongst off-price retailers, far bigger than its closest competitors, giving the company a big economic advantage. Lululemon is battling retailers selling the same types of items at lower prices, and it’s a matter of time before another company pops up with a brand which steals Lululemon’s thunder.

The bottom line

When a stock crashes on good news, there’s a problem and it’s usually valuation. Investors got too excited and are now paying the price. Buying Lululemon at the current price, even after the decline, will likely lead to sub-par returns over the long-term. There are many alternatives which offer growth for a more reasonable price, and I suggest those over Lululemon.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Lululemon Athletica (NASDAQ:LULU).

The article Why did This Stock Crash on Good News? originally appeared on Fool.com and is written by Timothy Green.

Timothy is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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