Lululemon stock bulls took a nasty hit a few weeks ago.
This, after earnings fell short of expectations.
When I see a stock get hammered like this, I immediately check it out to see if I can buy it at a discount. After all, I’ve made a lot of money over the years by investing in oversold stocks.
So I took a closer look at Lululemon stock (NASDAQ: LULU) to see if it was worth a quick trade.
I’ll tell you my thoughts on that in a moment. But first, I want to go back to January when the stock sold off a bit following some comments made by founder Chip Wilson.
In an interview with Forbes, Wilson lashed out against the company’s decision to embrace the whole DEI thing. If you’re unfamiliar, DEI stands for diversity, equity, and inclusion. Companies typically intertwine it with corporate training in an effort to promote the equal treatment of underrepresented groups in the workplace.
Theoretically, DEI makes sense. Why wouldn’t you want a work environment where diversity, equity and inclusion is just a part of everyday corporate culture? But in practice, it hasn’t been particularly effective. Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
I’ve never had to sit in on a DEI training, but I did watch a training video on YouTube. Mostly just out of curiosity. And boy was it painful to watch. It was so absurd, it almost looked like a Saturday Night Live skit.
Having a corporate shill dictate to grown-ass adults on how they should communicate with minority co-workers really isn’t going to do much more than piss people off.
I’m not saying corporate America doesn’t have a problem with embracing diversity and inclusion in the workplace. But forcing people to follow a set of protocols designed to essentially keep a company from getting sued, isn’t actually going to improve diversity and inclusion goals. It’ll just create more tension and animosity. And certainly we’ve seen proof of that.
Now when Chip Wilson made those comments about DEI, they called him everything from a racist to a fascist. But what did he actually say?
Apparently, Wilson didn’t like the models used in the company’s ads. They represented a variety of races, genders, ages, and sizes. He called them “not inspirational.”
“They’re trying to become like the Gap, everything to everybody. And I think the definition of a brand is that you’re not everything to everybody. You’ve got to be clear that you don’t want certain customers coming in.”
While I see where Wilson’s logic is going, there is a flaw in what he sees as inclusive marketing.
Incorporating inclusiveness into marketing strategies doesn’t actually mean including “everyone.”
As Forbes journalist Sonia Thompson pointed out, inclusive marketing is all about being intentional about acknowledging the ways in which consumers are different. Choosing which identities you will serve, and then incorporating those identities throughout your marketing.
Truth is, about four years ago, Lululemon made a conscious decision to expand its size offerings. Essentially reaching out to larger-sized customers. Something Wilson loathed, but also something that enabled the company to post significant increases in revenue growth from 2021 to 2023. Make no mistake: widening its customer base is what enabled that growth.
But to be honest, I don’t see this as a lesson in DEI at all. This is just good business. The important question now, however…
Is Lululemon Stock a Good Buy at These Levels?
While the company’s Q4, 2023 revenue came in strong at $3.21 billion, analysts were not particularly enthusiastic. Decreased U.S. store visits, plans to open fewer stores in 2024, and a dip in consumer spending spooked investors, and the stock tanked. The stock is now trading at around $350 a share.
Looking ahead, we know that the company indicated the first half of 2024 would be soft. That softness has likely been figured in at this point. And while expansion in the U.S. is expected to slow, European and Asian expansion could make up the difference.
As long as the company can maintain its impressively high margins, I do believe the negative sentiment on Lululemon stock could be a bit overdone at this point. That being said, the stock isn’t really a screaming buy at these levels. If anything, it’s pretty fairly valued at around $340 to $350 a share.
Of course, here at Energy & Capital, we don’t much care about “fairly valued stocks.” We’re looking for those big bargain stocks. Stocks that are trading at discounts of at least 40% or more.
Take, for instance, psychedelic stock MindMed (NASDAQ: MNMD), which was trading at a steep discount just a few weeks before I told you about it last month. Since then, the stock has delivered gains in excess of 83%.
Why waste your time on chasing a few pennies on Lululemon stock when you can be bagging 80% gains inside of one month? You wouldn’t.
And that’s why I’m sharing with you my latest investment note on 2 biotech stocks that are currently trading at discounts in excess of 57% and 62%.
You can read more about those stocks here. To a new way of life and a new generation of wealth… Jeff Siegel
@JeffSiegel on Twitter
Check us out on YouTube!Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.
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