OPINION

Stocks in the News: Lululemon Pants Recall Reveals Too Much

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

Stock number one is: 

Pandora Media Inc., (SYMBOL: P) and the headline says: New CEO Should Help Radio Embrace Its Digital Future – Morgan Stanley

Pandora Media has selected digital-advertising veteran Brian McAndrews as its new CEO, Chairman and President.  Morgan Stanley says “we think Mr. McAndrews is well-suited to lead Pandora in its efforts to evangelize the digital radio advertising model to broadcast radio buyers.”

The company took a small loss last year, will make a small profit this year, and then earnings are projected to grow rapidly.

The stock price is up 23% since we urged investors to “buy low” during the August market correction, and it broke through upside resistance today.  Expect Pandora stock to climb for a while now.  The next stock price catalyst will be a report on the September listener metrics in early October.

Our Ransom Note trendline says:  BUY PANDORA MEDIA.

P Chart

P data by YCharts

Stock number two is: 

Bristol-Myers Squibb Co., (SYMBOL: BMY) and the headline says: Bristol-Myers Prostate Cancer Treatment Falls Short -- NASDAQ.com

Bristol-Myers reported lackluster results in drug trials to treat advanced prostate cancer, prolonging patients’ lives by about five weeks.  Phase III studies are underway for patients with less-advanced cancer, who responded better to treatment.  The drug is currently successful in treating melanoma, and the company is seeking to use it to treat additional cancers.

Bristol-Myers is a profitable company, but lacks earnings growth.  The PE is 25 and the dividend yield is 3.22%.

After a huge run-up this year, the stock corrected in August, and will likely trade between $41 and $48 for the rest of the year.  We think the stock is grossly overvalued.

Our Ransom Note trendline says..... HOLD BRISTOL-MYERS.

BMY Chart

BMY data by YCharts

Stock number three is:

Lululemon Athletica Inc. (SYMBOL: LULU ) and the headline says: Lululemon Cuts Profit Forecast on New Merchandise Delay -- Bloomberg

Lululemon stock is down about six percent today after the company fine-tuned its annual profit forecast. A yoga pants recall in March has seriously disrupted the company’s ability to get sufficient inventory into its retail stores.  Earnings growth projections then fell dramatically to 7% growth this year.

The company is expanding internationally, adding men’s stores, and adding golf & tennis apparel to its product lines.  Aggressive earnings growth is expected to resume in 2014.  The PE is 33.

Lululemon’s stock price is on the low end of a medium-term trading range between $62 and $82.  Traders and aggressive growth investors should jump in here.  Everyone else should be cautious with this volatile stock.

Our Ransom Note trendline says....  BUY LULULEMON.

LULU Chart

LULU data by YCharts

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis.