Wall Street has a funny way of getting distracted by shiny objects. Meanwhile, Lululemon—the athleisure brand that transformed stretchy pants into a cultural phenomenon—is practically begging for attention.
I've been tracking $LULU for months now, and something doesn't add up. The stock has been drifting downward like a forgotten yoga mat, yet its financials tell a completely different story. We're talking about a company posting a 42% return on equity, sitting on $1.3 billion in cash, and trading at a P/E of just 13—metrics that would make most retailers drop their green smoothies in shock.
Let me be clear: this valuation disconnect hasn't happened in 15 years.
What's particularly fascinating (and what most analysts seem to be missing) is Lululemon's brand alchemy. They've somehow convinced millions of reasonable people that $128 yoga pants aren't just nice to have—they're essential. That's not retail; that's practically religion.
The international story deserves special attention. While American retailers often faceplant spectacularly overseas—Target's Canadian misadventure still makes retail executives wake up in cold sweats—Lululemon is quietly crushing it abroad. They're planning 40-45 new stores, primarily international, with China as the crown jewel in their expansion strategy.
Haven't we seen this movie before? Premium Western brand enters China, consumers go wild?
What caught my eye was management's guidance. They're baking in about 20% international growth as their baseline. Having covered retail for years, I recognize classic sandbagging when I see it. Companies don't lowball numbers unless they're feeling pretty damn confident about what's coming.
And then there's Michael Burry. Yes, THAT Michael Burry—the housing crisis prophet portrayed by Christian Bale in "The Big Short." He's been quietly accumulating shares. When someone who made billions betting against conventional wisdom starts buying something, I tend to pay attention. Burry isn't exactly known for chasing meme stocks; he hunts for fundamental disconnects between price and value.
The $400 price target floating around would mean roughly 37% upside from current levels. Aggressive? Maybe. But not remotely impossible given their trajectory and cash position.
Look, retail investing can be treacherous as hell. Consumer tastes change faster than TikTok trends. Margins get squeezed. Inventory problems materialize out of nowhere. But occasionally—just occasionally—the market overcorrects, creating one of those rare opportunities that scream "mispriced asset."
The combination of rock-solid fundamentals, international runway, and smart money interest suggests Lululemon might be precisely that opportunity.
Is it a guaranteed winner? Of course not. (Nothing is in this business.) But when you see a best-in-class operator trading at decade-and-a-half valuation lows while maintaining industry-leading metrics... well, it at least deserves a spot on your watchlist.
The market gets moody about retail stocks. Always has. But numbers don't lie, and Lululemon's are telling a story that, for whatever reason, Wall Street seems determined to ignore.
Sometimes the best investments are hiding in plain sight, wearing $128 yoga pants.
