So far this year, numerous issues have weighed heavily on Lululemon (LULU 5.29%). The athleisure apparel company's shares have fallen 53% year to date (as of Oct. 28). Uncertainty remains high among both the Wall Street analyst community as well as retail investors.
The question, of course, is what this means for Lululemon shares moving forward. Fortunately, this stock may have more than one route back to its heyday. Don't expect it to happen overnight, but between now and 2028, shares could trade for much higher prices than they do today.
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Challenges persist, but a turnaround may be taking shape
From macroeconomic issues like tariffs and inflation to more company-specific problems like rising competition, Lululemon is experiencing slowing revenue growth and margin pressure, not to mention increased uncertainty around its outlook.
Still, following the stock's big pullback, its valuation already accounts for these negatives, and then some. Right now, the stock trades at a forward price-to-earnings (forward P/E) ratio of just 13. That's lower than other apparel companies, including Nike. Despite the industry leader's own struggles and ongoing turnaround effort, , shares of Nike are three times as expensive at just over 40 times forward earnings estimates.
As leadership at Lululemon executes its recovery plan, the discounted valuation could mean big gains are in store for shareholders if the company's efforts prove successful.
NASDAQ: LULU
Key Data Points
Lululemon has more than one path to recovery
Between now and 2028, a normalization of macro issues, coupled with new product innovation, including the company's recent move into NFL-branded apparel, should support stronger results for Lululemon. This may not get shares back to their previous peak above $515 per share, but it could be enough to outperform the broad market.
Meanwhile, there have been reports this year that founder Chip Wilson may try to take the company private. Any sort of buyout offer is likely to come with a sizable premium to the present stock price.
That said, investors should only buy the stock if they believe in Lululemon's turnaround strategy -- buyout speculation alone is not a sound investment rationale.
