Lululemon: 2 Signs the Bottom Is In, and 1 Sign It Isn't

Core Viewpoint - Lululemon Athletica Inc has experienced a significant decline in stock price, down approximately 60% from its January peak, despite revenue being near all-time highs and a historically low P/E ratio [1][2]. Technical Analysis - The stock has not set a new low since mid-September, indicating a potential bottom formation, with recent buying activity suggesting increased buyer aggression [3][5]. - The Relative Strength Index (RSI) is trending upward from oversold levels, indicating that bearish momentum may be fading [4]. - As long as the stock holds above the $160 level, a temporary bottom may be forming [5]. Analyst Sentiment - Some analysts, like Janine Stichter from BTIG Research, maintain a bullish outlook with a price target of $303, suggesting a potential upside of nearly 75% from recent prices [6][7]. - The P/E ratio has decreased from nearly 30 to below 12, making the stock's risk/reward profile attractive compared to peers like Nike, which trades at 35 times earnings [8]. Bearish Perspective - Despite some bullish sentiment, several analysts remain skeptical, with Bernstein downgrading their rating from Outperform to Market Perform, citing a lack of near-term catalysts and elevated execution risk [9][10]. - The downgrade carries weight given the stock's significant decline, indicating that caution is still warranted [10]. Outlook - The current situation presents a mix of being deeply oversold and fundamentally strong, suggesting a potential for recovery if the stock can maintain levels above $160 [11].