Investors might be distracted by the fact that Lululemon (LULU 0.96%) shares currently trade 66% below their record from December 2023 (as of Oct. 6). At one point, this was a monster stock, something that's easy to forget. During the five-year period leading up to its peak, shares skyrocketed 321%.
It's definitely challenging to be bullish on this apparel stock these days. But can Lululemon turn a $10,000 investment into $20,000 by 2030?
Image source: Lululemon.
The market never likes slowing growth
It wasn't long ago that Lululemon was consistently posting greater than 20% year-over-year revenue gains. It flourished during the pandemic, catering to changing consumer tastes and leaning on its strong digital presence.
Competition from other premium brands, a lack of fresh product innovation, and macro headwinds have hurt sales recently. Lululemon's revenue increased by just 7% in Q2 (ended Aug. 3). Demand trends in the U.S. have been particularly worrying.
Valuation expansion and earnings growth can lift shares
Investors can easily find reasons to be optimistic, though. Lululemon still has an extremely strong brand. It's very profitable. And it's rapidly growing internationally, especially in China.
Nothing is guaranteed, but the combination of a low starting valuation (shares trade at a price-to-earnings ratio of 11.9) and higher earnings power five years down the road can produce a satisfactory result. It wouldn't be surprising to see the stock price double by 2030.
