Stock Investing

Lululemon Stock - Final Call

Value Investing with Sven Carlin, Ph.D.
Value Investing with Sven Carlin, Ph.D.•Mar 20, 2026

Why It Matters

Lululemon’s depressed valuation offers a potential high‑reward play for investors willing to bet on a successful turnaround, while the inventory buildup and margin pressure pose significant downside risks.

Key Takeaways

  • •Lululemon trades at P/E 11, far below Nike’s 40.
  • •U.S. sales down 6% while international growth keeps revenue flat.
  • •Inventory surge of $300 million threatens margins and earnings quality.
  • •Potential $1 billion buyback could boost returns if CEO delivers turnaround.
  • •Private‑equity valuation suggests $12‑15 billion floor price for investors.

Summary

The video delivers a final assessment of Lululemon’s stock, arguing that the current price may represent a rare value entry point. With a price‑to‑earnings multiple of roughly 11 versus Nike’s 40, the analyst frames the apparel maker as a potential bargain, provided the company can navigate a challenging operating environment.

Key data points include a 6% decline in U.S. sales offset by modest international growth, leaving overall revenue essentially flat. Gross margins have slipped slightly, and a $300 million jump in inventory raises concerns about future write‑downs. The speaker notes a planned $1 billion share‑repurchase program—about 9% of market cap—that could lift earnings per share if the new CEO stabilizes product creation and execution.

The analyst cites the founder’s warning that the brand’s creative engine is faltering, and highlights the unusually low stock‑based compensation ($90 million) and a $40 million unredeemed gift‑card liability as quirky but potentially cash‑generating items. Comparisons to past turnarounds at Nike and Adidas illustrate how fashion cycles can lag U.S. trends by one to two years, suggesting a delayed rebound may be possible.

If Lululemon can resolve inventory excess and deliver on buybacks, the stock could appreciate sharply, especially for private‑equity investors targeting a $12‑15 billion valuation floor. Conversely, failure to execute would keep the company trapped in a low‑growth, margin‑pressured niche, making the current price a high‑risk gamble.

Original Description

Lululemon Stock - Final Call
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