Trade Call: Buy Lululemon at Undervalued Levels
"Now, let's start with Lululemon stock. The apparel retailer, the athleisure company, is trading at a current market price of $178 per share. The fair value I calculated for Lululemon is $256, signaling that this stock is undervalued at the current market price. I'm forecasting that Lululemon's free cash flow increases from 1.36 billion in 2025 to 2.31 billion in 2034. Why are they down so much this year? Well, mostly because of tariffs. The company imports a tremendous amount of products into the United States, and higher tariffs have made their products more expensive to U.S. consumers."
The speaker recommends buying Lululemon, noting its market undervaluation compared to a calculated fair value of $256, driven by robust free cash flow growth and the impact of tariffs on pricing.
Bearish Trade Call for Lululemon (LULU)
"The second one is Lululemon, which I told you guys to avoid in my last video. Its trading at $167 per share and down 55% year to date, with comparable sales dropping to 1% and a massive disappointment in guidance. The CEO even admitted that the company has become too predictable in its casual offerings, missing key trends. I think Lululemon has the potential to be a trap because you cant really predict consumer preferences, and personally, Im not touching it."
The speaker issues a bearish trade call on Lululemon (LULU), citing its significant decline (55% YTD), falling comparable sales, and acknowledged stagnation in product trends by the CEO. Despite the stock trading at an attractive valuation, the uncertainty around consumer trends and market dynamics makes it a potential trap, leading the speaker to avoid investing in it.
Lululemon Faces Commoditization Pressure Amid DTC Challenges
"But for now, Lululemon, what they're fighting through is, is that their business is getting commoditized and they either need to figure out how to get people to want to pay more for their version of this product again, or how do we make money in a market where we have to bring prices down to compete?"
The discussion highlights concerns over Lululemon's ability to maintain premium pricing amid competitive pressures and market commoditization. While Lululemon has succeeded with a hybrid DTC and offline strategy, investors should watch how it manages these economic pressures to sustain margins.
Avoid/Liquidate Lulu Lemon Positions
"Lulu was going to shit the bed. It shit the bed. It shit the bed. Lulu Lemon is down 20% and the quant has it as a strong sell... I don't buy Lulu Lemon."
Highlighting Lulu Lemon's management issues and technical weakness (down 20%), the speaker advises against buying or holding the stock. Despite Wall Street having a 22% upside target, his quant model rates it as a strong sell, providing a clear actionable signal to avoid or liquidate positions in Lulu Lemon (ticker LULU).