Have you ever watched a stock that everyone seems to have written off suddenly start showing signs of life again? That’s exactly how I’m feeling about Lululemon these days. After a tough stretch where the market fixated on slowing U.S. sales, the shares have been quietly building a base—and now, things are starting to look interesting again.
It’s funny how investor sentiment can swing so dramatically. Just a year or two ago, this was the darling of retail growth stocks. Then came the concerns about market saturation in North America, and the stock took a beating. But sometimes, when expectations get beaten down that far, it creates real opportunity. In my view, that’s where we might be right now.
Why Lululemon Could Be Setting Up for a Strong Recovery
The story here isn’t just about hoping the U.S. business magically rebounds overnight. Instead, it’s about something bigger: the company’s shift toward becoming a legitimate global brand. While North America has matured—there’s no denying that—the growth engines elsewhere are firing on all cylinders.
Perhaps the most exciting part is what’s happening in China. Even as many consumer brands struggle there, Lululemon’s premium positioning seems to be resonating strongly. Sales in the region have been growing at an impressive clip, reminding me of how some luxury names have found success by appealing to aspirational buyers.
The International Opportunity That’s Still Underappreciated
Right now, international markets make up roughly a quarter of total revenue. That’s actually quite low when you think about other successful apparel brands that have gone global. There’s plenty of runway left for store expansion, e-commerce growth, and brand building in new territories.
Management deserves credit for handling this transition thoughtfully. They’re not aggressively overexpanding in weak markets or letting inventory balloon. Instead, they’ve tightened controls, protected margins, and even accelerated share repurchases. That kind of discipline during a softer period speaks volumes about operational maturity.
I’ve always believed that great companies shine brightest when navigating challenges. The way leadership has managed capital allocation here—buying back stock when others might panic—feels like a vote of confidence in the long-term story.
- Significant share repurchases in recent quarters
- Healthy cash pile providing flexibility
- Inventory levels under control despite U.S. headwinds
- Margin protection even in a transitional phase
These aren’t flashy moves, but they’re the kind of behind-the-scenes strength that often precedes stock re-ratings.
Valuation That’s Hard to Ignore
Let’s talk numbers for a moment, because this is where things get really compelling. Lululemon currently trades at a noticeable discount to both its own history and comparable companies, despite delivering superior profitability.
The forward price-to-earnings multiple sits around the mid-teens—well below the broader apparel or premium consumer peer group. Yet net margins remain in the mid-teens too, roughly double what many competitors achieve. That combination of high profitability trading at low multiples doesn’t happen often.
Growth expectations have been tempered, sure. Analysts project modest revenue and earnings increases over the next couple years. But here’s the thing: when a stock de-rates this much, even steady progress can drive meaningful upside as sentiment normalizes.
| Metric | Lululemon | Industry Average |
| Forward P/E | ~16.5x | ~21.7x |
| Expected EPS Growth | ~2.0% | ~6.6% |
| Expected Revenue Growth | ~4.4% | ~5.4% |
| Net Margins | ~15.7% | ~6.9% |
Looking at this table, it’s clear the market has priced in quite a bit of pessimism around near-term growth. But the margin advantage stands out dramatically. Superior profitability provides a buffer—if international expansion delivers even moderate success, earnings power could surprise to the upside.
Technical Signals Pointing Higher
From a chart perspective, the stock spent months consolidating in a range that looked like classic bottoming action. Prices bounced between support and resistance, shaking out weak hands while patient investors accumulated.
More recently, we’ve seen a decisive breakout above key levels, followed by a successful retest. That’s often the signature of institutional buying stepping in. Relative strength versus broader indices has also turned positive—a subtle but important shift.
If this momentum continues, initial targets around the mid-$200s seem reasonable, with longer-term potential stretching significantly higher should the global growth narrative fully take hold.
The best opportunities often emerge when a high-quality business temporarily falls out of favor.
That’s not an official quote from anyone specific—just something I’ve observed over years of watching markets. But it feels particularly relevant here.
A Practical Options Approach for Bullish Exposure
So how might an investor express this view without simply buying shares outright? Options provide interesting ways to define risk while still capturing upside potential.
One structure that appeals to me involves selling a put spread. Specifically, consider collecting premium by selling higher strike puts while buying lower strike protection. This creates a credit position that profits if the stock remains above the higher strike through expiration.
The beauty of this approach lies in its risk-reward profile. You receive cash upfront, lowering your effective cost basis. Maximum loss is defined and known in advance—crucial for disciplined trading.
- Identify strikes aligned with technical support levels
- Choose expiration far enough out to allow the thesis time to develop
- Collect meaningful premium relative to defined risk
- Monitor for early management opportunities if the stock moves favorably
For example, a February expiration spread selling the $210 put and buying the $195 put for a net credit around $5 would offer attractive characteristics. The breakeven lands near current breakout levels, providing cushion while still delivering solid return potential if shares hold firm.
Of course, no trade works every time. If the stock were to break down sharply, losses could materialize. That’s why position sizing matters immensely—never risk more than you’re comfortable losing.
Risks Worth Keeping in Perspective
No investment thesis is complete without acknowledging potential pitfalls. Leadership transitions always introduce some uncertainty. U.S. consumer spending remains under pressure from various macroeconomic factors. Competition in premium activewear isn’t going away.
Yet many of these concerns already reflect in the discounted valuation. The margin of safety appears reasonable given the company’s financial strength and international momentum.
In my experience, the most rewarding setups often involve high-quality names trading at temporarily depressed prices due to fixable or transitional issues. Lululemon checks many of those boxes today.
Putting It All Together
Stepping back, the combination of accelerating international growth, disciplined capital return, superior profitability, and attractive valuation creates an asymmetric setup in my view. The stock may not shoot straight higher—markets rarely work that cleanly—but the risk-reward feels tilted toward patient investors.
Whether through direct shares or carefully structured options positions, gaining exposure here could make sense for those with a multi-quarter horizon. Sometimes the best opportunities hide in plain sight, waiting for the crowd to rediscover what made a company special in the first place.
At these levels, Lululemon seems to be offering exactly that kind of second-look potential. The global brand transformation is underway, and the market may finally be ready to give credit where it’s due.
(Note: All trading involves risk. The ideas presented here are for educational purposes and reflect one perspective on current market conditions. Always conduct your own research and consider your personal financial situation before making investment decisions.)
