A Small Cap Equity holding: Uniti Group Inc. (UNIT, $10.16) “Covid Resistant and Growing” by: Elisabeth Desmarais, AIM Student at Marquette University

 Uniti Group Inc. (UNIT, $10.16) “Covid Resistant and Growing” 

By: Elisabeth Desmarais, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

• Uniti Group Inc. (NASDAQ: UNIT) is a unique real estate investment trust (REIT) that focuses on acquiring and building infrastructures in the communication industry. The fiber network focused company operated in the following segments: Leasing, Fiber Infrastructure, Towers, Consumer CLEC, and corporate. 

 

• While the COVID pandemic is hurting many industries badly, the telecom one is not part of them. 

• The first driver of UNITI’s pitch from this past September was the current upcoming high demand or Fiber Optic Network during the pandemic. The trends and obligations to stay at home and quarantine increased this demand and need for most people. 

• Another driver included Windstream’s Bankruptcy Emergence. At first, the bankruptcy created some uncertainty from the investors in how UNITI will be able to pay their dividend and bounce back since the stock was strongly impacted by this event. However, this gives the company a lot of room to increase the business operations as well as their paid dividends. 

• Windstream who takes a huge part of the organization’s business finally file out of Chapter 11 bankruptcy on September 21^st.  The company has a good amount on hand at the moment to fuel growth but was also able to get rid of $4 billion in debt, thus a great positive for both companies. 

Key points: Uniti Group is strongly dependent on Windstream which account for approximately 65% of the company’s revenue. According to that, the coming out of bankruptcy for Windstream was a positive hit for UNITI. Windstream’s CEO, Tony Thomas, mentioned the importance of reaching this milestone, thus leading to a healthier financial and liquidity standpoint for the company. 

While Windstream was part of the big risk of the company, it has to keep a high market share, however, we can be assured that the fiber industry is not too competitive, and that Windstream should be able to cover the 30% of market share they are aiming for. 

Moreover, in the latest third quarter report, the company announced a strategic transaction with Everstream Solutions LLC. This new OpCo-ProCo deal with Everstram includes two 20-year IRU lease agreements which will be covered in 8 states, thus 10,000 route miles and 220,000 stand miles. The cash consideration for Uniti after selling some of their Northeast operations to Everstream plus the IRU payments will equal an approximate of $135 million. 

In addition, the company was officially pitch due to its very unique business model and offerings. The company still has a lot of drivers and opportunities in front of them. The presence and growth of 5G plays a role in the business and the need for greater bandwidth and faster speed connections will remain as a driver of UNIT. However, the consideration of high cost of installation during this economic period can be uncertain. 

While on the drivers of in the pitch of this stock was the dividend policy certainty, it not exactly the case, considering that might actually be uncertain even with the consideration of Windstream bankruptcy emergence. UNIT who was projected to have the covenants lifted once it reaches a 5.75x net leverage, which will likely not happen in the next two following years. The company is a fast growing one, however, not in the dividend aspect like it was projected to be. 

What has the stock done lately?

The company has continued its growing strategy by acquiring new fiber networks operators. These acquisitions include Southern Light and PEG Bandwidth. In October, Uniti Group has purchased Information Transport Solution (ITS), a company who provides connectivity services while having a main focus on educational clients. The company has also declared a cash dividend of $0.15 per common share for the quarter. 

Past Year Performance: From November 5^th announcements, the company has leverage ratio at quarter of 6.1 times, based on the net debt annualized adjusted EBITDA. In addition of AFFO per share of $0.42 for the third quarter and $258.8 million revenue. With a current price of 10.16, the stock price has been going up, slowly, for the past year. UNIT’s revenue from Windstream has decrease to 64% from 70% about a year ago.

Source: FactSet

My Takeaway

The company previous legacy, Windstream, fill out for bankruptcy earlier on and got out of it this year on September 21^st, thus bringing prosperity to UNITI and its new settlement with the company. The settlement of litigation of Windstream who constitute a great part of the business revenue has been successful. The company has also expanded its operations with the acquirement of new entities with different stands such ad OpCo-ProCo transaction resulting in independent financial and credit terms. UNIT’s diversification strategy and goal of decreasing its revenue percentage from Windstream has come to life, however, it is still not close to its final goal of having 50% of their revenue from them. 

Source: FactSet

A Small Cap Equity holding:Dicks Sporting Goods (DKS, $58.51): “Sports are back Stronger than Ever” by: Matt Schembari, AIM Student at Marquette University

 Dicks Sporting Goods (DKS, $58.51): “Sports are back Stronger than Ever”

By: Matt Schembari, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary:

• Dick’s Sporting Goods, Inc. (NYSE: DKS) is a full-line sport store that is located in the United States. They have carried apparels from all the big sporting companies.  

• Dick’s Sporting Goods has extreme loyal costumer, with their Scorecard Loyalty Program brining in 70% of their sales. This is important with all the uncertainties in the world with COVID-19.

• Dick’s Sporting Goods has had a big e-commerce year due to COIVD. They are also in many long-term real estate investments which can limit Dick’s ability to switch out of some locations. 

• Dick’s Sporting Goods has stayed in the family. The current CEO is Edward Stack, and he is the son of Dick Stack who founded the company.

• Although in quarter two for Dick’s was the main reason why their growth YOY was 42%. I believe there will be an increase in quarter four. 

Key points: Dicks Sporting Goods remains a very promising Stock with the ability to continue and have a great fourth quarter. During the third quarter their revenue ended at 2.24 billion. They have also increased EPS by 1.05 during the third quarter, and I only see it growing headed into the fourth quarter. They also hold a higher gross margin then most of their competitors during the quarter three.

Dick’s Sporting Goods has been adapting well to COVID. Every company has had to make changes constantly and are trying to figure out the best ways to still make a profit while making their employees happy. Dick’s did end up having to close 15% of the stores which they own. This would cause some worry to some companies, but Dick’s focused their attention on making their e-commerce stronger. Dick’s was able to increase their e-commerce sales by 160%. Secondly, with the COVID they have focused on pushing more social distanced sporting products such as golf, which has increased almost 50% during COVID. 

Dick’s Sporting Goods also has a great private label. They have been focusing on growing this more recently. Dick’s does a great job offering items that are well represented from the NCAA, NBA, and FIFA. This gives them a great source of revenue from well-known apparel distributors. They also have a great private brand which brings in 14% of their sales. This is only behind Nike which is one of the most well-respected sporting apparel stores in the world.

DKS is trying to constantly give back to the community and know everyone is struggling during this challenging time. Dick’s Sporting Good teamed up with LISC in early November to invest in more the $12 million to the Black Economic Development Fund. This fund is to help lower the racial wealth gap. Dick’s Sporting Goods also is offering a “10 Day of Black Friday”. The reason of this is to offer people sales for a longer period and to try to limit the crowded stores on Black Friday.

What has the stock done lately?

Since early November till currently there has been an increase in the stocks price. It has increased more the $5 EPS in the last month, which came at the same time of investing 12 million into the Black Economic Development Fund. Over the past quarter the price of the stock have gone up almost $4 per share. The increase over the entire quarter and the increase in the past month shows the company is on a strong trend upward.

Past Year Performance: DKS has increased the valuation by 20.79% over the past year. While saying this I do believe the company is still very strong and still currently being undervalued. The 52-week range has been $13.46 - $63.29. This is an extremely large range which seems so big but can be reasoned with the fact that COVID-19 happened. With the growing of e-commerce sales of 160% over the last year DKS has great upside.

Source: FactSet

My Takeaway

Dick’s Sporting Goods constant growth in the e-commerce section of the company is growing more than this last year with an increase of 160%. Even though there was a slight drop in sales in the third quarter I believe there will be a bigger increase in the fourth quarter. Dick’s has a great private brand that they are trying to grow, along with bringing in sporting apparels from key sporting vendors like the NBA, NCAA, and FIFA. Finally, DKS is constantly trying to offer and help the community around them by offering a longer black Friday sales in order to lower the spread of COVID-19 and also investing in the Black Economic Development Fund.

Source: FactSet

A Small Cap Equity holding: ITT, Inc. (ITT, $72.76): “A New Drive Forward” by: Drew Kolz, AIM Student at Marquette University

ITT, Inc. (ITT, $72.76): “A New Drive Forward” 

By: Drew Kolz, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by

myself, and it expresses my own opinions. I am not receiving compensation for it and I have no

business relationship with any company whose stock is mentioned in this article

 

Summary

·      ITT, Inc. (NYSE: ITT) engages in the engineering of products and solutions for the industries of energy, transportation, and industrial markets. ITT sells their products to companies in the United States and EMEA. 

·      ITT has approximately $1.5 billion in available liquidity. They are showing a great effort to expand their financial flexibility in hopes of making more investments in the near future.

·      While the automotive industry overall suffered during the pandemic, ITT’s demand for their friction brake continues to rise. 

·      ITT is located in over 125 countries and has a set of very well diversified brand/product lines that has helped them weather the storm. 

 

Key Points:

A main strength of ITT is their strong balance sheet. With $782.3 million in cash, $490.2 million in short-term receivables, and over $1.5 billion in total liquidity, ITT has given itself a great opportunity to increase their market share. Given that so many other competitors in the automotive and aerospace industries have not been able to withstand the effects of the pandemic, increased acquisitions and mergers should be seen in the near future by ITT. 

 

Acquisitions made by the team in 2019 continue to produce great benefits for the company as a whole. The two acquisitions of RPG and Matrix Composites have led to direct increases in both production time and sales. With adjusted segment operating income increasing by 10.3% in 2019, it is very clear that their acquisitions had a direct impact on sales. This increase in adjusted segment operating income can be mainly attributed to the increased sales volume strength in project pumps and friction OEM share gains. 

 

ITT was one of many companies across the globe that were negatively affected by the pandemic. Given their business has a heavy reliance on the travel industries, they lost out on revenue due to the decreased demand for those industries. As the automotive and airline industries see an increased usage over time again, expect the demand for ITT’s products to increase as well. 

 

What has the stock done lately?

Over the past 3 months, the stock has generated a 18.65% return. The stock is currently trading at $72.76 and is trending towards exceeding its 52-week high of $75.56. This is great recovery from a YTD low of $35.41 that was reached in mid-March. As more positive news is released about the virus, one can assume that the stock price shall continue to rise in the near future. 

 

Past Year Performance: ITT has returned 5.34% over the past year. This number is slightly lower than the benchmark which returned 12.85% The pandemic has had a negative effect overall on this company, but they are closing out the year back at pre-pandemic levels. 

 

Source: Factset

My Takeaway: 

ITT was originally added to the portfolio with a target price of $65.22. After recovering all of the stock price losses from the pandemic, there is reason for optimism in the near future. ITT’s strong balance sheet and willingness to expand in the past suggests that they will continue to try and increase their market share. Furthermore, as the demand for their friction brake continues to rise, so should their share price. Given these opportunities, I recommend the AIM portfolio hold ITT.

Source: Factset  

An International Equity holding: Eaton Corp. Plc (NYSE: ETN, $122.74): “Must Be What They’re ETN: Why Shares Grew During the Pandemic” by: Thomas Washington, AIM Student at Marquette University

Eaton Corp. Plc (NYSE: ETN, $122.74): “Must Be What They’re ETN: Why Shares Grew During the Pandemic”

By: Thomas Washington, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 

Summary

·   Eaton Corp. Plc (NYSE: ETN) is a diversified power management company that provides energy-efficient solutions for electrical, hydraulic, and mechanical power. ETN’s operations are segmented into Electrical Products, Electrical Systems and Services, Hydraulics, Aerospace, Vehicle and eMobility which operate within the United States and Internationally.

·      Strategic direction to become an intelligent power management company through utilization of macro trends including, IoT, energy transition, electrification, and blended power.

·      Target’s within planning horizon include $3B of free cashflow, 2-3% organic growth, 8-9% EPS growth, and 20% segment margins.

·      In 2019 ETN launched a share buyback program to repurchase $1.9B of stock.

·      ETN announced a $280M multi-year restructuring program to gain efficiencies and reduce its cost structure in response to declining market conditions. 

 

Key Points: The $280M restructuring program includes $187M in Q2 2020 in order to reduce structural costs in markets that will have slower recovery from the pandemic. Poor market conditions brought about by the Covid-19 pandemic were the deciding factor in ETN’s decision to implement a multiyear restructuring program. Additional expected restructuring charges through 2022 are $93M including charges of $33M $55M and $5M in 2020, 2021, and 2022 respectively. The program is set to be fully implemented by 2023 at which point it is expected to yield $200M in mature year savings. 

During 2019 and 2020 ETN was completed seven transactions regarding the acquisition or disposition of related companies in order to support efforts to become a more nuanced power management company. The inorganic growth strategy implemented by ETN has positioned the company nicely to enjoy growth in organic revenue in the near future. Pandemic related obstacles had a negative impact on ETN’s organic revenue, but the company managed to increase organic revenues during the year with Q3 2020 organic revenue being down 9% YTD but having increased 16% from the previous quarter.

The share repurchase program the company adopted in 2019 determined that shares were to be repurchased with market conditions, market price, and capital level all taken into account. 2020 market conditions positioned ETN nicely in order to execute 2019 program with $177M of shares being bought back in Q3 2020. Q3 repurchases brought ETN’s YTD repurchase total to $1.5B, still $400M below the programs target. 

 

What has the stock done lately?

ETN shares have enjoyed 31.82% increase in price over the last 12 months, a very hopeful sign amid current market conditions. This level of growth in valuation is impressive no matter the year, but in the context of the last 12 months this level of growth is even more remarkable. The stock is reletavely volatile with a 52 week range of $56.41 - 120.34, but appears to be well positioned to create value in the wake of the pandemic. 

 

Past Year Performance: ETN beat Q3 revenue forecasts by 7.5% with revenue reaching $4.5B. Earnings per share came in at $1.11, approximatly 5% above analyst predictions. Share repurchase programs indicate strong cash flow and will likely boost EPS. 

Source: Factset

My Takeaway

Boasting YTD price growth of 31.82%, ETN has significiantly increased shareholder value and appears to be on track to generate returns for the next several years. The restructuring plan ETN implemented this year will give it a leg up in the post pandemic world as it will cut costs find efficiencies in the aspects of operations that were most effected by the pandemic.

 

Source: Factset

A Small Cap Equity holding: Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI, $52.43): “With Biden as President, Renewable Energy Can Expect to See Rapid Growth” by: Garrett Gajewski, AIM Student at Marquette University

Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI, $52.43):“With Biden as President, Renewable Energy Can Expect to See Rapid Growth”

By: Garrett Gajewski, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

• Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE:HASI) is the first United States pubic company that is solely dedicated to investing in climate change solutions. This includes solar, wind, stormwater remediation, and others. 

• First REIT to invest a significant amount of capital into solar energy, with only several other REIT’s just getting started.

• The return on equity for the first quarter of 2020 was 12.2%, due to its pipeline of orders.

• Has a pipeline of $2.5B worth of deals to be done in the next 12-month period.

• The Biden presidential win will help the entirety of the renewable energy industry, more specifically HASI, and will significantly hurt fossil fuels like oil and coal.

Key points: Hannon Armstrong Sustainable Infrastructure Capital, Inc. has been able to distinguish themselves as the first major player in the newly developing sustainable REIT industry. Other REIT’s are finally starting to realize the profitability and potential and are slowly tip toeing into sustainability. It is expected that HASI will remain the dominant player in the coming years and grow at a significant rate due to their pipeline. 

For the upcoming 12-month period, HASI has a pipeline of $2.5 B, which includes 54% from Behind-the-Meter (BTM), 28% from Grid Connection (GC), and 18% from Sustainable Infrastructure (SI). To top this off, HASI saw an average ROE of 9.2% in 2019 and saw a quarterly ROE of 12.2% for its Q1 report in 2020.

It is very well known that Millennials and Generation Z’s are pro-environment and pro-sustainability as many of these individuals have been expressing their beliefs a lot lately. A plethora of people voted for Joe Biden in early November solely because of his plans that are focused on helping the environment. President Trump had no plans to implement environmental and sustainability regulations and policies during a second term as President. Furthermore, Trump made it aware that he was in full support of the fracking and oil industries, which many environmentalists were unhappy with. Now that Biden will be taking over the White House in January, some of his first regulations to be implemented will be environmentally and sustainability focused.

What has the stock done lately?

HASI has beat their past four EPS quarterly reports and is poised to beat again in December. Their most recent EPS consensus was 0.26 in September, and HASI beat that consensus with a 0.28 EPS, representing a 7.69% surprise. On November 4^th, the day after the election, HASI closed at $42.83. As of November 18^th, the stock price was $52.43 and has continued climbing. Biden’s presidency was the macroeconomic catalyst that this company has been waiting for. 

Past Year Performance: HASI has increased 82.56% in value over the past year. During the March Covid-19 selloff, HASI saw a low of $15.01 and has seen an impressive recovery. Currently, the price of HASI is sitting at $52.43 and should continue to see growth as renewable energy and real estate thrive. 

Source: FactSet

My Takeaway

Renewable energy, energy efficiency, and other sustainable infrastructures are the future and will eventually put an end to fossil fuels. With the recent Joe Biden presidency, he has plans to help significantly reduce methane and carbon emissions, along with a 400B dollar investment in clean energy over the course of 10 years. I anticipate that Biden’s presidency alone will help launch HASI’s share price to a level that has never been seen and will help HASI to become one of the fastest growing REITS in the next four years. Additionally, I will not be surprised if HASI is the best performing REIT in the AIM portfolio, and if not one of the best performing holdings.

Source: FactSet

 

An International Equity holding: Wix.com Ltd. (NASDAQ: WIX, $249.05): “Fast Burning WIX” by: Dan Dunn, AIM Student at Marquette University

 Wix.com Ltd. (NASDAQ: WIX, $249.05): “Fast Burning WIX”

By: Dan Dunn, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

• Wix.com LTD is a cloud-based service that provides website building tools for a variety of customer segments, appealing to both experienced coders as well as the beginner builders. Their software takes the customer through simple steps to customize the website, and both free and premium subscriptions are offered.

• Even as pandemic mentality began to slow down, the initial positive effect of COVID continued to build eCommerce growth through Q3. Revenue is up 29% YoY.

• A new partnership with Vodafone provides the ability to sell-off of Vodafone’s Business Marketplace platform and will continue to expand international exposure.

• The final stages of development of Editor X are now taking place with beta tests. When completed, the new tool should bring significant sales growth to WIX.

• WIX payments and other built-in complementary services will continue to build revenue as newer merchants find the ease of implementation outweighs their small fees.  

Key points: COVID-19 drove WIX to have a fantastic Q3, even with the apparent end of the pandemic on the near horizon. The company beat its highest range of estimates for revenue, bringing in $4.6M more than analysts expected. FCF also exceeded expectations, coming in at $19.4M. Collections numbers were also better than expected. 

The increase of world-wide digitalization due to the pandemic appears to have added to the company’s success, with the demand for website building and hosting increasing. A lot of this growth has come from brick-and-mortars that are moving online. However, the company has also been able to continue to develop its product portfolio and innovate to meet customer needs. Management is expected to take a hit in FCF in the next few months to continue to push the success of these added products through continued aggressive marketing and sales. 

Editor X is expected to debut this year and is currently in beta. The company has stated that they are not currently marketing it aggressively but are expected to do so once they are confident in its finished form. Editor X is a tool designed for professional website designers who can manipulate code to further customize website structure. WIX management has stated they have seen a significantly quick adoption of it by their agencies participating in the beta.

VIX has emphasized and invested into the importance of cybersecurity, and it is expected to pay-off in the long haul. Competitors like WordPress are continuing to see struggles through breaches of their websites, and WIX is expecting many professionals and customers to continue to switch based on these security breaches. The combination of Editor X and tight cybersecurity could be the final tipping point for many professionals who use WordPress to develop websites for their clients.

eCommerce is expected to continue to increase and drive growth. WIX Payments is a large part of this. 80% of the website’s new eCommerce customers are adapting WIX Payments, which is designed to be a streamlined payment process that a consumer visiting a WIX website would be using to pay the merchant. WIX takes a small fee for every transaction using this technology implemented into the merchant’s website. 

What has the stock done lately?

After the announcement of Q3 earnings on Friday, shares were initially down $8.67 after trading closed on Friday, despite the positive sentiment from the earnings call. Shares have risen back to 249.05. In the last three months, shares have fluctuated with the volatility in the market, and have ultimately been down -11.90%, from about $282 in mid August. P/S preliminary for Q3 is reported at 15.5, down slightly from June’s 16.4.

Past Year Performance: WIX shares have increased 103.51% in value YTD. Since the purchase of the shares in late April of 2020, the AIM international portfolio has seen WIX shares grow by slightly more than 100%. Its YTD high is $309.59 and its low traded at $81.50. Compared to the benchmark, Russell 2000, it is significantly outperforming small cap equity, which is up 12.24% in the last full year, while WIX is up 91.03%.

Source: FactSet

My Takeaway

While COVID-19 has had a significant impact on the company’s earnings, a lot of this growth would have come eventually with the growing importance of the online marketplace. The pandemic did little more to WIX than speed up the process at which this was going to happen. Editor X should begin to draw professionals to WIX in the next year, and the company will continue to capitalize on its cybersecurity. The AIM International Fund should continue to hold WIX as long as it continues to innovate and maintain its lead in the website development sector. More consistent and steady growth should occur as the impact of the pandemic winds down in 2021.

Source: FactSet

 

An International Equity holding: Lululemon Athletica Inc (LULU, $345.74): “When Life Gives You Lemon, Make Lemonade” by: Justin Nguyen, AIM Student at Marquette University

Lululemon Athletica Inc (LULU, $345.74): “When Life Gives You Lemon, Make Lemonade”

By: Justin Nguyen, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

• Lululemon Athletica Inc. (NASDAQ: LULU) is a market leader in the designing, manufacturing, and distributing athletic wear and accessories for men and women. The company is headquartered in Vancouver, Canada and has big international presence in the United States, Mainland China, Japan, and others. 

• LULU operates through two business segments: company-operated stores with 506 stores (63% of FY19 Revenue) and direct to consumers (29%).

• While COVID-19 significantly hurts the company’s operated stores, a very positive path emerged as LULU’s e-commerce saw the incredible rise.

• Meghan Frank was appointed as the LULU’s chief financial officer (CFO) in November 20^th, 2020, after being with the company for four years. 

• LULU could be back on its trend of crushing analysts’ expectations as positive news for COVID-19 vaccines were released.

Key points: 

Lululemon Athletica’s performance has dropped since the beginning of FY 2020 due to the COVID-19 pandemic as the company has to close its stores in Mainland China, North America, and other regions. For that reason, LULU’s company-operated stores revenue dropped significantly from $583.8 million in Q2 FY19 to just $287.2 million this Q2. This is the main driver for the drop in the company’s value during the February – March period as this sector represents over 60% of total revenue. Recovery has been positive for LULU, fortunately, as it has been able to reopen 492 out of 506 stores as of August 2^nd. 

In November 21^st, Lululemon named Meghan Frank as its chief financial officer. Ms. Frank has been with the company since 2016 and has been involved in the retail industry for over 20 years. The company’s first female CFO actually has been very active in helping the company combating COVID-19 and is expected to help LULU secure its financial position during this fluctuating time. The political changes in the United States, where Lululemon generates over 70% of its total revenue, will have to be carefully considered. 

As bad as the effect of the pandemic may have seemed, the company was able to utilize it to find  new lights in its e-commerce operations as it saw an incredible 155% increase in revenue, rising from $217.6 million to $554.3 million for Q2 year-over-year. This figure now represents 61.4% of total revenue, replacing its company-operated stores segment to have the highest revenue contribution. While this may only be temporary, it creates a lot of positivity over LULU’s tremendous upside in its e-commerce. With its company-operated stores expected to go back on track as the development for vaccines has been positive, Lululemon’s performances would be very promising over the next couple years. 

What has the stock done lately?

Since the market recovered from the initial shock of the pandemic when LULU was trading at only around 136$/share, the company’s value has gone up roughly 150%. The company’s stock is now trading at $345 per share as its recovery beat that of the S&P 500 by a wide margin. 

Past Year Performance

Over the past 52 weeks, Lululemon’s value has gone up roughly 60% despite the drop in February and March. Since, it has been bullish until the company’s stock dropped 12% in September. This drop has more to do with the sell trend in the broader market at the time rather than a response to LULU’s financials as it still beat the analysts’ estimates. For the past three months, LULU has been on a steady climb. 

Source: FactSet

My Takeaway

Lululemon was added to the AIM International Fund in April 2016 at around $65 per share. The stock has now gone up roughly five times since, mostly due to the excellent strategy of creating and utilizing the culture of yoga pants. As young people recognize the value of working out, Lululemon saw the opportunity to present its athletic wear with the best quality to deliver unique  comfort to the consumers. The company’s products has even gone beyond the purpose of working out as it is very common to see its products, especially yoga pants, to be worn by many as casual clothes. As Gen Z is expected to follow the trend in addition to its thriving e-commerce, Lululemon is still in a very solid position to grow. The bad part of the year seems to have passed, and Lulu was able to make its lemonade. The sugar is expected to be added in the near future, and thus the AIM International fund should be patient and the sweetness would come. 

Source: FactSet