It’s been a disappointing year for this premium apparel stock, Lululemon Athletica (LULU). Since reaching a record high at the end of 2023, the stock has plummeted by 44%, despite the S&P 500 performing well during the same period.
While Lululemon has been a standout performer in the market over the past decade, investors are growing increasingly pessimistic about the company’s future. The intensely competitive nature of the apparel industry, with no barriers to entry and constantly changing consumer tastes, makes it challenging for Lululemon to sustain its success.
However, there are still reasons to be bullish about Lululemon. The company has a strong brand and a history of high profitability, with a solid gross margin and impressive free cash flow generation. Additionally, Lululemon has significant growth opportunities in international markets, particularly in China.
Furthermore, the stock is currently trading at a more attractive valuation compared to previous years, with a lower price-to-earnings ratio than the overall market. Analysts expect the company to continue growing its revenue and earnings per share in the coming years, making it a compelling investment opportunity.
While there are valid concerns about Lululemon’s future prospects, there are also compelling reasons to consider buying the dip in this growth stock. Investors will need to weigh the bear and bull arguments for Lululemon carefully before making a decision on whether to invest in the company.
