It's a tale of two athletic apparel makers. Nike (NKE) reported third-quarter results that were better than Wall Street had been expecting. Lululemon Athletica's (LULU) fourth-quarter revenue was in line with estimates, but its outlook for the first quarter was disappointing.
On Nike, Morningstar Equity Analyst David Swartz says the company is facing "economic challenges in all of its major regions" including China. Swartz notes that China's high youth unemployment may be taking a toll on Nike's results.
For Lululemon, Swartz points out that the company tends to "have a history of promising low and delivering high, so I'm always a bit skeptical about their guidance." Noting the stock's sharp decline in after-hours trading, Swartz says he is one of the few analysts arguing that it is has been overvalued. "That's kind of what happens when you have an overvalued stock. If there is even a mild disappointment, the stock can fall pretty fast," Swartz says.
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