The week in stocks: Lululemon gets stretched and is Tesla a TACO trade candidate?

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Every weekend, the Financial Post breaks down the most interesting developments in this week's world of investing, from top performers to surprising analyst calls and stocks you should have on your radar. Here's this week's edition.
Shares of Lululemon Athletica Inc. (LULU) fell nearly 20 per cent on Friday to close the week at US$265.27. The maker of fashionable workout gear and leisure clothing, which reported earnings on Thursday, said that sales fell in its Americas market in the first quarter and that it is already seeing lower traffic, especially in the United States as tariffs rattle price-conscious consumers. The company issued worsening guidance for the second quarter projecting sales and profit below analyst estimates and trimming its earning outlook for the year and also warned it would have to raise prices. Besides the tariff headwinds, the Vancouver-based athleisure company is also facing more competition and shifting fashion trends. A report from Veritas Investment Research last month had warned that Lululemon was exposed to the trade war on a few fronts, with 50 to 60 per cent of its sales coming from the U.S. and most of its manufacturing happening overseas. Following the earnings release, analysts at Deutsche Bank, Jeffries and Co., and JPMorgan Chase & Co., were among those who cuts their price targets for the company.
Can Canada's premier stock market keep its hot streak going? That's the question prominent Bay Street economist David Rosenberg asked and answered in a note out this week. The S&P/TSX composite has been on a tear outpacing the S&P 500 by 12 percentage points over the last year. From June 2024, when Rosenberg noted 'the fortunes of the two indices began to diverge,' the TSX has risen 22.1 per cent compared to a 10 per cent gain for the S&P 500, in local currency, though the latter is ahead on a U.S. dollar basis. On the way to these gains, the TSX also hit a fresh record close above the 26,000 threshold on May 26. 'Victory laps aside, what matters most to investors at this time is where we see the outlook from here,' Rosenberg wrote. He thinks the conditions are in place for the TSX to keep rising, albeit at a slower pace. Among his reasons, Bank of Canada interest rate policy is more accommodative than U.S. monetary policy and with more cuts expected in the second half of the year that means more liquidity. 'Relative stability is being rewarded in Canada,' Rosenberg said as the outlook for earnings per share growth has held up while in the U.S. it's been scaled back.
The so-called TACO trade — Trump Always Chickens Out — turned the United States president into a stock market punchline in recent weeks. Coined by Rob Armstrong, the Financial Times' U.S. market columnist, the term refers to the the president's track record of backpedalling, especially on tariffs, and suggests investors would be wise to fade the chaos that has followed Trump's more disruptive policy announcements. But will the theory apply to his personal feuds, too? That's a question Tesla Inc. (TSLA) shareholders might be asking after a social media punchfest erupted between the President and Elon Musk that left Tesla shares battered and bruised. After falling almost 15 per cent on Thursday, Tesla ended the week as the worst performing stock on the S&P 500, down 13.9 per cent, according to Bloomberg. While there were signs of de-escalation Friday, betting on a TACO-style reversal may still be high risk.
'Sell in May and go away,' is pithy investing advice that has been repeated for decades. But technical analysts at CIBC Capital Markets said investors were wise to pay no heed this year. 'The catchy phrase may have a nice rhyme, but May has been positive in the past five years with better follow-through in July,' analyst Sid Mokhtari and associate Michael Petipas wrote in a note this week. Mokhtari and Petipas have been assembling a Top 10 picks list for the better part of the past 15 years based on historical seasonal analysis. They said June 'still skewed a bit positive though slightly neutral' but that they are expecting more positive momentum for returns in July. Here are their top 10 picks for June based on expected total returns over the next four to six weeks, or possibly as far out as three months:
Power Corp. (POW)
Sun Life Financial Inc. (SLF)
Exchange Income Corp. (EIF)
MDA Space Ltd. (MDA)
Eldorado Gold Corp. (ELD)
NGEX Minerals Ltd. (NGEX)
Artizia Inc. (ATZ)
Parkland Corp. (PKI)
Shopify Inc. (SHOP)
Killam Apartment Real Estate Investment Trust (KMP-U)
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Their top-10 ideas for May returned 4.5 per cent compared with a year to date return on the S&P/TSX composite index of 5.9 per cent, they said.
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