Down 68%, This Growth Stock Looks Oversold. Is It a Buy?

In the span of 2 years, Lululemon Athletica (NASDAQ: LULU) has gone from being a apical performer successful the apparel assemblage to 1 of the worst.

The banal is present down 68% from its highest astatine the extremity of 2023 arsenic its maturation has slowed dramatically. There's nary azygous origin that is liable for that pullback, but rather, determination person been a fig of causes. The institution is facing expanding contention arsenic the athleisure marketplace appears to beryllium getting commoditized. By its ain admission, it hasn't done capable to support its styles fresh. Discretionary spending has been anemic successful the U.S. owed to a slugglish labour marketplace and stubborn inflation, and Lululemon has been hammered by tariffs, particularly the removal of the de minimis exemption, which forced it to rearrange its organisation web to fulfill e-commerce orders successful the U.S. Those issues led to the departure of erstwhile CEO Calvin McDonald, and the institution is inactive successful the process of uncovering a imperishable CEO. Founder Chip Wilson is besides waging a proxy battle, signaling his vexation with management, and, to his delight, Lululemon named erstwhile Levi's CEO Chip Bergh to its committee yesterday arsenic well.

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Despite those challenges, the banal looks similar it whitethorn person conscionable bottomed out.

On Tuesday night, Lululemon reported fourth-quarter net that edged past expert expectations, but its 2026 guidance was disappointing. The banal was really down aft hours connected the report, but past jumped during the regular trading session, and closed up 3.8% connected Wednesday, a motion that investors whitethorn judge that the banal is excessively inexpensive to ignore.

The fourth-quarter study showed that Lululemon's problems remain. Revenue roseate conscionable 1%, oregon 6% excluding the other week successful 2024, to $3.64 billion, beating estimates of $3.58 billion.

Comparable income roseate 3%, but declined again successful the cardinal Americas segment, falling 3%. International income remained robust with comps up 20%, driven by a beardown show successful China.

Profit margins shrank chiefly owed to tariffs, which had a 520-basis-point interaction connected gross margin. Overall gross borderline fell from 60.4% to 54.9%, and arsenic a result, operating nett dropped 22% to $812.3 million. Earnings per stock declined from $6.14 to $5.01, which topped the statement astatine $4.77.

Guidance for 2026 shows that the retailer expects its challenges to continue, arsenic it called for gross of $11.35 billion-$11.5 billion, up from $11.1 cardinal successful 2025 but beneath estimates of $11.52 billion.