lululemon Stock Looks Cheap: Buy Now or Wait for Better Entry Point?

Core Insights - lululemon athletica inc. (LULU) is experiencing a downtrend due to weak U.S. demand and margin pressures from promotions and higher costs, despite some support from international markets [1][6] - The stock is currently undervalued with a forward P/E multiple of 15.1X, lower than the industry average of 16.28X, and a price-to-sales ratio of 1.95X compared to the industry's 2.35X [2][4] - LULU shares have declined 53% over the past year, significantly underperforming the broader industry and major competitors [5][9] Valuation and Performance - LULU's P/E ratio of 15.1X is much lower than competitors like Ralph Lauren (21.53X), Under Armour (37.05X), and NIKE (30.96X), indicating a discounted valuation [4] - The stock's current price of $192.79 is 54.5% below its 52-week high of $423.32 and trades below its 50 and 200-day moving averages, reflecting bearish sentiment [9][10] Market Dynamics - The decline in LULU's stock is attributed to a reset in growth and earnings expectations rather than a decline in brand strength, with management noting a cautious consumer environment in the U.S. [13][14] - Profitability pressures are compounded by a promotional environment and higher costs, leading to reduced operating leverage and limited ability to offset these pressures [14][15] Growth Potential - International markets, particularly China, are providing growth support, although they are not yet sufficient to counterbalance North American weaknesses [15] - The Zacks Consensus Estimate for fiscal 2025 indicates a 4.6% revenue growth, but a 10.8% decline in EPS, while fiscal 2026 estimates show similar growth trends with a slight decline in earnings [16][17] Recent Developments - Recent holiday performance has been strong, leading to an upward revision in fiscal 2025 earnings estimates, reflecting improved near-term visibility and confidence in execution [20] - Analysts are optimistic about lululemon's ability to stabilize demand and improve operational control, supported by strong international momentum [20][21]