2 Reasons Lululemon Athletica Stock Could Stay Hot

Short-term LULU options are attractively priced at the moment

by Patrick Martin

Published on Apr 24, 2019 at 12:13 PM

Ahead of today's annual analyst day, Lululemon Athletica inc. (NASDAQ:LULU) unveiled its strategic plan to accelerate growth in the next five years. The athletic apparel retailer will continue to focus on its women's and accessories divisions, while doubling revenues in its men's and digital businesses and quadrupling international revenues by 2023. In response, LULU earlier tapped a fresh record high of $179.49, but the fun could be far from over for the retail stock, if history is any guide.

Specifically, the stock's Schaeffer's Volatility Index (SVI) of 31% ranks in the 14th percentile of its annual range. This indicates short-term options are cheap, from a volatility perspective.

What's more, per data from Schaeffer's Senior Quantitative Analyst Rocky White, the one other time since 2008 that LULU was trading within 2% of a new 52-week high while its SVI was ranked in the bottom 20th percentile of its annual range, the equity posted a one-month gain of 10.42%. A similar jump would put the equity in new record-high territory of $193.08 by this time next month.

In late March, Lululemon stock rode an earnings-induced bull gap past previous resistance at the $150 level. From there, the shares have continued to climb, guided higher by their ascending 10-day moving average while logging five straight weekly wins. A round of price-target hikes could help LULU add to its impressive 44% year-to-date gain, too, considering the security's consensus 12-month price target sits at $175.18, a chip-shot from its current perch of $174.86.

Daily Stock Chart LULU

Options traders will be pleased to know that the stock's Schaeffer's Volatility Scorecard (SVS) stands at a 96 out of a possible 100. This means the security has tended to make outsized moves over the last year, compared to what the options market had priced in -- a boon to premium buyers.

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