LULU, CHWY & KMX Earnings Previews

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It’s a pretty light earnings week as we wrap up the first quarter of 2021 but there are a few significant companies on different fiscal years reporting.

The most important one is Lululemon (LULU, Market Cap $41 Billion). LULU is a hybrid of what I’ve been calling Reopen Value and Growth. As a result of its valuation, LULU stock has broken down since its December 17, 2020 closing high – down almost 19% since then.

Even after this correction, however, LULU is still far from cheap at 63x EV / Diluted EPS for the four pre-COVID quarters ended February 2, 2020.

Let’s turn next to online pet retailer Chewy (CHWY, Market Cap $32 Billion). CHWY is what I’ve been characterizing as Speculative Growth with no current earnings and has been hammered in the recent correction, down 34% over the last six weeks. This was exactly the kind of stock that had rolled over during the correction since mid-February and whose technical damage I considered “unrepairable” and was shorting similar names via ARKK.

However, my premise since Friday afternoon has been that the Fed started buying stocks in the last hour and that may have reignited the riskiest part of the stock market of which CHWY is a part, at least for the short term.

Last, let’s turn to used car retailer Carmax (KMX, Market Cap $22 Billion) which reports Thursday morning. KMX is pure Reopen Value, a group that had not yet rolled over prior to Friday afternoon’s craziness. Prior to the last hour Friday, I expected these names to top shortly, but the Fed’s intervention in the stock market may have delayed this. Fundamentally, at 25x Diluted EPS for the four pre-COVID quarters ended February 29, 2020, KMX looks more than fully valued to me.

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