Lululemon Is Valued Like It's 2010—And Burry's Loving It As Stock Breaks Out

Lululemon (LULU) shares are trading at 15-year valuation lows, with a P/E of 13.76 and over $1.3 billion in cash, presenting a potential discount opportunity. Noted investor Michael Burry's Scion Asset Management has made LULU a top holding, acquiring 50,000 shares which now constitute 16.43% of the fund, signaling strong conviction in a rebound. Technically, the stock exhibits bullish breakout signals, including clearing its eight-day simple moving average and a bullish MACD crossover, suggesting a potential run higher for the athletic apparel giant.

Analysis

Lululemon Athletica (LULU) presents a compelling investment case based on a convergence of deep value metrics, strong institutional conviction, and emerging technical buy signals. The company is trading at a 15-year valuation low with a price-to-earnings ratio of 13.76, which appears disconnected from its robust fundamentals, including a 43.35% return on equity and a strong balance sheet with over $1.3 billion in cash. This value proposition is significantly bolstered by Michael Burry's Scion Asset Management establishing a major new position, with 50,000 shares now comprising 16.43% of its fund. From a technical perspective, the stock has shown initial signs of a breakout by clearing its 8-day simple moving average and registering a bullish MACD crossover. Although it remains below its longer-term 20-day, 50-day, and 200-day moving averages, its Relative Strength Index (RSI) of 44.76 suggests the stock has ample room for upward movement before becoming overbought.

Key Decisions for Investors

• Given the 15-year low valuation and strong fundamentals like a 43.35% ROE, value-oriented investors should consider the current share price a potentially attractive entry point into a premium brand.
• The significant new stake by Scion Asset Management provides a strong institutional tailwind, suggesting investors could consider aligning with this high-profile contrarian bet on a rebound.
• Technical traders should view the recent break above the 8-day SMA and the bullish MACD crossover as positive, but should seek confirmation through a sustained move above the 20-day and 50-day moving averages before committing significant capital.
• Investors should remain mindful that the stock is still in a longer-term downtrend below its 200-day moving average ($308.29), and a failure to build on the current momentum would invalidate the short-term bullish thesis.