Lululemon Selloff Overdone in Light of Pending Ruling: StockTwits.com

NEW YORK (TheStreet) -- Lululemon  (LULU) pants caused customers undue exposure, but the company doesn't face additional legal risks. And that is reason for investors to put the see-through pants saga that culminated in a recall last year behind them, say cashtaggers on StockTwits.com.

Lululemon not blamed 4 hiding see-thru pant problem/Lululemon prevails in lawsuits over yoga pants recall http://stks.co/f0TAL $LULU

-- marina strauss (@MarinaStrauss) Apr. 4 at 12:14 PM

A judge said Friday that investors in the athletic wear company should not be allowed to sue for management allegedly failing to disclose problems with the opacity of some black yoga pants. The stock edged higher Friday after news of the judge's draft decision, but plunged more than 4% on Monday.

$LULU nothing has changed & the stock is bullish, this is nothing more than what I call a 'micro pullback' or 'fractal pullback' on move up

-- So Generous (@sogenerous) Apr. 7 at 12:18 PM

Many investors on StockTwits.com said the selloff was overdone. Sentiment on Lululemon is 95% bullish, despite the recent weakness. Many are buying what they see as an opportunity to get shares for cheap.

$LULU added another 1/3 position here. Will add another third at 49.5 if we get there

-- LongandShort (@lngndshrt) Apr. 7 at 12:23 PM

StockTwits investors argued Monday that the company's turnaround is working. They see hopeful signs in the company's direct to consumer sales, which climbed 25% in the fourth quarter from the same period a year ago, according to last month's quarterly report. And they say that fourth quarter net revenue growth of 7%, for a total of $521 million, wasn't bad for a brand that suffered an image crisis last year.

They're not alone in their assessment. Of the 24 analysts tracked by the Analyst Ratings Network, half have buys on the stock. Nine have hold ratings. Only three have sells. The consensus price target is $61.56. Lululemon traded at $52 intra day.

Of course, some cashtaggers don't believe a clothing company can ever recover after admitting that its pants were basically transparent in certain situations. But many more argue that things are looking more solid for the company. And that's good news for long term investors and pants buyers.

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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