Symbols

Is lulu a good stock to buy now for the long term even though it dropped 20% after hours today?

6/6/2025 02:33am

Aime

The deep research logic is organized as follows: 

Okay, let's tackle this question about whether LULU is a good long-term buy despite the recent 20% drop. First, I need to check the provided references and background to gather all relevant data. The user is interested in ESG and Berkshire Hathaway's portfolio, so I should highlight any ESG-related strengths or alignment with value-driven investing.

Looking at the references, there's a lot of recent data from 2025-06-05. The stock dropped 20% after hours due to lowered guidance. The key points from the earnings report include a 7% revenue increase, 1% comparable sales growth, and a slight EPS beat. However, the company cut its full-year EPS guidance to $14.58-$14.78 from $14.95-$15.15, which missed analyst estimates. The main reasons cited were tariffs and economic uncertainty, especially in the U.S. market.

The user is looking for a long-term perspective, so I should consider the company's fundamentals, growth metrics, and valuation. The 5-year CAGR for revenue, net income, and EPS are all strong (24.54%, 32.49%, 34.3% respectively). The company has no debt, which is a plus for financial health. However, the lack of a dividend (no yield) and no history of dividend payments might be a concern if the user values income. The stock repurchased $335.35 million in Q1 2026, showing cash flow strength but also indicating that management is focused on share buybacks rather than dividends.

ESG-wise, LULU is in the apparel sector, which can have sustainability challenges. However, the company has a strong brand reputation and focuses on quality products, which might align with certain ESG criteria. There's no explicit ESG data provided, but the company's innovation in products (like new yoga lines) could be seen as a positive for sustainability if they're using eco-friendly materials.

The user's profile mentions a preference for large-cap stocks with resilience. LULU has a market cap of around $39.7B, which fits the large-cap category. The stock's recent drop might present a buying opportunity if the fundamentals remain strong. The analyst consensus is still "Outperform" with a price target around $337, which is slightly above the current price of $330.78. However, some analysts have lowered their targets, like Morgan Stanley cutting theirs to $346 from $373.

I should also consider the competition and market position. LULU is a leader in athleisure, but faces competition from Nike and others. The company's international growth, especially in Asia, is a positive sign. The weak U.S. comparable sales might be a temporary issue due to macroeconomic factors.

Putting it all together, the stock has strong historical growth, a solid balance sheet, and a resilient business model. The recent drop is due to short-term concerns about tariffs and economic uncertainty, but the long-term outlook remains positive. The user's focus on ESG and value stocks might align with LULU if they're comfortable with the sector's sustainability profile and the company's commitment to innovation and quality.

Conclusion 🎯
Lululemon Athletica (LULU) presents a compelling long-term opportunity despite its recent 20% post-earnings drop. The stock aligns with your preference for large-cap resilience and value-driven investing, supported by strong historical growth, no debt, and consistent cash flow. However, the short-term risks of macroeconomic uncertainty and tariff pressures must be weighed against its long-term growth potential in the athleisure market.

📊 Key Analysis

1. Recent Performance & Catalysts

Earnings Beat: Q1 2025 EPS of $2.60 vs. $2.58 estimate ¹².
Revenue Growth: 7% YoY to $2.4B, driven by 19% international expansion ¹².
Guidance Cut: Full-year EPS lowered to $14.58–$14.78 (vs. $14.95–$15.15 prior) due to tariff impacts and economic uncertainty ¹².

1/2

LULU Total Revenue, Net Income...

2. Long-Term Fundamentals

Metric	2020–2025 CAGR	Key Takeaway
Revenue	24.54%	Consistent top-line growth driven by international expansion ⁴.
Net Income	32.49%	Profitability improving faster than revenue, reflecting operational efficiency ⁴.
Diluted EPS	34.3%	High earnings growth aligns with Peter Lynch’s GARP criteria ⁵.

3. Valuation & Risk

PEG Ratio: 0.90 (below 1, indicating undervalued relative to growth ⁵).
Debt: $0 (no leverage risk, aligning with Berkshire Hathaway’s conservative approach ⁵).
Share Buybacks: $335.35M in Q1 2026 ⁶, signaling cash flow strength.
Dividend: None (no income for dividend-focused investors ⁷⁸).

4. ESG Alignment

Sustainability: Apparel sector challenges, but LULU’s premium, quality-driven brand may appeal to eco-conscious consumers ⁵.
Innovation: Recent product launches (e.g., Glow Up, BeCalm) suggest commitment to differentiation ⁹¹.

📉 Risks to Monitor

Tariff Pressures: 40% of products sourced from Vietnam face U.S. tariffs ¹⁰.
U.S. Comparable Sales: Declined 2% YoY in Q1 2025 ¹.
Competition: Intense rivalry with Nike (NKE) and other athleisure brands ¹⁰.

📈 Why Buy Now?

Price Target: Analysts project $337.35 (1.99% upside from $330.78) ¹¹.
Long-Term Catalysts: International growth (Asia-Pacific expansion) and product innovation ¹¹⁰.
Resilience: No debt, strong cash flow, and a 21.97 P/E ratio (reasonable for growth stocks ⁵).

📊 Final Take

LULU is a buy for long-term growth if you can tolerate short-term volatility. Its strong fundamentals, no debt, and global expansion make it a resilient choice for your portfolio. However, avoid if you prioritize dividends or are risk-averse.

Rating: ⭐️⭐️⭐️⭐️ (4/5)
Price Target: $337–$346 (1.99%–4.5% upside) ¹¹¹².

Source:

1. lululemon athletica inc. Announces First Quarter Fiscal ...