After reporting good earning results in December, shares of Lululemon Athletica (LULU) - Get Report have steadily declined. With the stock down about 2% for the year, investors are hoping the company's upcoming results on Wednesday after the close are enough to boost the stock.
Lululemon has put up good numbers over the past few quarters, TheStreet's Jim Cramer, manager of the Action Alerts PLUS portfolio, said from the floor of the New York Stock Exchange. Despite the good results though, shares have fallen to $63 from $70 over the past few months.
The stock has developed a pattern when it comes to earnings. Cramer explained that when Lululemon releases its results, short-sellers jam the stock lower to make the report look worse than it really is.
After investors go through the results though, they see the good in it and begin to buy the stock. Look at Nike's (NKE) - Get Report most recent quarter to see similar action. After one bad day of post-earnings trading, Nike shares have already recovered most of their losses.
For investors, Cramer said not to enter Lululemon's report with a short position. For those looking to get long, he suggested buying the $55 call options expiring in a few months in order to capture potential upside. If the shorts knock shares lower, consider buying the common stock.
The quarter may be difficult to understand at first, but the results should be good, Cramer concluded.
Analysts expect the company to earn $1.01 per share on $783.56 million in sales.
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At the time of publication, Cramer's Action Alerts PLUS had no position in companies mentioned.