Lululemon’s P/E Is Back to 2017 Levels: Should You Buy the Dip?

Lululemon Athletica Inc. (LULU) is a leading retailer of technical athletic apparel, gear, and accessories for women and men. The company's products are designed for the lifestyle of those seeking an active lifestyle, focusing on yoga, running, training, and other forms of fitness. Lululemon's stock price has experienced a significant dip in recent months, causing some investors to question whether this represents a buying opportunity.

According to Yahoo Finance, as of August 2022, Lululemon's Price to Earnings (P/E) ratio has dropped back to around 23. This ratio was significantly higher at around 45 in late 2020. A lower P/E ratio indicates that the stock may be undervalued compared to its historical levels.

Analysts and institutions continue to have a positive outlook on Lululemon. According to MarketWatch, the average price target for LULU stock among analysts covering the company is $333.63, which represents a potential upside of approximately 23% from its current price.

Moreover, Lululemon has reported strong financial results in recent quarters. In its Q3 2022 earnings report, the company reported revenue growth of 23% year over year, driven by both e-commerce sales and store sales. The company also raised its full-year revenue guidance.

Additionally, Lululemon has been expanding its product offerings beyond its core yoga and fitness categories. The company has been making strides in the active lifestyle category with its "We Made Too Much" line, which offers discounted items from previous collections. This expansion has helped the company attract a wider customer base and increase sales.

Furthermore, Lululemon has been investing in technology to enhance its digital capabilities. The company has launched a new mobile app and has been testing buy online, pick up in store (BOPIS) options. These initiatives are expected to drive growth in e-commerce sales and improve the overall customer experience.

In conclusion, while Lululemon's stock price has dipped, causing some concern among investors, the company's strong financial performance, positive analyst sentiment, and expansion efforts suggest that this may represent a buying opportunity. With potential double-digit upside according to analysts, LULU could be a solid addition to an investment portfolio. However, as with any investment decision, it's important to consider your personal risk tolerance and investment goals before making a purchase.