Where Are The Opportunities After The Big Changes at Lululemon Athletica inc. (LULU)?

Toronto De-listing

Finally, Lululemon has voluntarily de-listed itself from the Toronto Stock Exchange. While its Canadian listing made sense during the company’s early growth phase, its Nasdaq listing now handles the bulk of its share volume and provides tremendous liquidity for a company of its size. The ramifications of this decision are unclear, but it is possible that it will smooth out some of the day-to-day volatility for which Lululemon’s stock is notorious.

Invest or Stay Away?

Lululemon Athletica inc. (NASDAQ:LULU) excites passions among longs and shorts alike. Since convincing theses can be made for trades on all sides of this name, it is imperative that investors conduct their own due diligence. However, it is possible to make some generalizations about the firm that could influence investing decisions.

For starters, Lululemon remains overvalued relative to its peers. In light of the turmoil within its management ranks and recent product-quality issues, this could leave it vulnerable to bad news. Moreover, the company has issued some aggressive sales projections that may be difficult to reach over the next few years. The risky male-targeted expansion provides plenty of additional reasons to be cautious as well.

In sum, Lululemon Athletica inc. (NASDAQ:LULU) is a risky stock that could break in either direction. While its beaten-down shares and aggressive sales forecasts suggest that its current valuation could be warranted, it remains vulnerable to forces beyond its control. Investors who do wish to play the firm for a short-term bounce should use sensible hedges. Meanwhile, long investors may wish to offset their positions with options or other tools.

The article Where Are The Opportunities After The Big Changes at Lululemon? originally appeared on Fool.com and is written by Mike Thiessen.

Mike Thiessen has no position in any stocks mentioned. The Motley Fool recommends Lululemon Athletica and Under Armour. The Motley Fool owns shares of Under Armour. Mike 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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