NKE - Lululemon: Fundamentals Remain Intact But Fairly Priced
2024-05-28 02:43:39 ET
Summary
- Lululemon's share price has dropped by 40% YTD due to underwhelming guidance for 2024 and the departure of its Chief Product Officer.
- The stock has rerated to ~25x PE, which I view as fair given the slower growth outlook for Lululemon and weakening macro-environment.
- Contrary to bearish analysts, I believe LULU's fundamentals remain intact, and competition worries are an over-reaction.
Collapse In Share Price
Lululemon Athletica Inc. ( LULU ) has seen its share price collapse by a stunning 40% YTD. This was largely driven by two key events: (1) Underwhelming guidance for 2024 back in March and (2) Departure of Chief Product Officer just like week. Understandably, this has triggered the excitement and attention of numerous investors as LULU is seen to be a "high quality" company by many, and such a huge drop in share price could signal a buy opportunity. In this article, I will seek to objectively analyse the bull and bear arguments surrounding LULU and determine if the company is still a fundamentally strong business amidst all the market noises.
Recap on FY23 Earnings
Let's take a quick recap on FY23 earnings for LULU, which caused the biggest dip and weakening investor sentiment surrounding the stock....
Lululemon: Fundamentals Remain Intact But Fairly Priced