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Lululemon Athletica Down 16 Percent on Unexpected News

Lululemon Athletica (NASDAQ: LULU) is down more than 16 percent in mid-morning trading Tuesday after CEO Christine Day unexpectedly steps down.

If you’re looking for the perfect recipe to send a stock (or an index) tumbling, just throw a healthy dose of uncertainty into the mix, and watch the stock fall. That’s exactly what happened Tuesday.

Sure, Sterne Agee, UBS, and Credit Suisse all downgraded the stock on the news but the real reason the stock is down is because nobody knows why Day resigned. The most logical reason would be the recent recall of some of the company’s pants that were too sheer in the hind quarters but that was a story that came and went rapidly. Nobody believed that it was big enough to cause a large scale earnings or PR hit to the company.

That leaves investors to winder and that’s why analysts downgraded the stock and why the stock is down double digits.

The stock has had a banner year. Lululemon Athletica is up more than 11 percent this year and until Tuesday, investor and analyst sentiment have been mostly positive. Value investors will look closely at this name since no material news that affects the near-term prospects of the company have been revealed.

Disclosure: At the time of this writing, Tim Parker had no position in any of the companies mentioned.

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