🥔Potato Capital Research Report - Lululemon (LULU)

June 19, 2025

📌 Lululemon Athletica (NASDAQ: LULU)

Last Updated: June 24, 2025
Rating: 🟩 Undervalued
Current Price: $225.56
Base Case 12‑Mo Target: $260
Scenario‑Weighted Target: $252
Expected 12‑Mo Return: ~12%

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🔑 Executive Summary

Lululemon is no longer an underappreciated growth compounder - it’s a fully rerated global brand operating at benchmark ROIC with a premium valuation to match. With forward P/E now ~15× and EV/EBITDA at ~11.7×, the stock trades below peers like Nike and Hermes, despite superior margins and capital efficiency.

As of June 24, 2025, shares trade at $225.56. Our base case assumes continued strength in China, double-digit international growth, and margin preservation above 22%. Mirror has been written down, inventories are healthy, and net debt is modest at ~$400M. ROIC remains exceptional at ~26% - more than double WACC - signaling long-term value creation.

At this valuation, Lululemon is mispriced relative to quality. The current multiple implies growth stagnation - yet earnings are set to grow mid-teens. Optionality in men’s, footwear, and global expansion offers upside that’s not priced in.

We estimate a base case 12-month target of $260, with a scenario-weighted target of $252. That implies an expected IRR of ~12%, supported by organic growth, operating leverage, and capital efficiency.

Lululemon remains a top-tier GARP name - now misclassified as mature, but still built to outperform.