Why Is Lululemon Stock Rising, and Is It a Buying Opportunity?
Key Points
Lululemon's stock has dropped by more than 75% in the past five years.
Investors are hopeful the company's new CEO, Heidi O'Neill, will be able to reinvigorate the brand.
The small pop in price was more likely due to broader investor rotation out of tech and into consumer discretionary and value stocks.
Shares of Lululemon (NASDAQ: LULU) have been beaten down over the past few years, but this week the stock popped more than 5% at times. A rotation out of tech stocks into consumer discretionary is the most likely reason for the gain. The rise, albeit small, is welcomed by investors who have watched the stock plummet by more than 75% over the past five years.
The apparel company is facing a slew of problems. From declining revenue and comparable sales to a cut in full-year guidance and reputational damage, the challenges are vast for the new CEO, Heidi O'Neill, who took the helm just a month ago. In the second quarter of 2026, revenue fell 4% to $2.4 billion while comparable sales were down 9%.
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On the positive side, Lululemon carries no debt on its balance sheet and has about $1.4 billion in cash. The company is also buying back shares.
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So does that mean this small jump in the stock is worth buying into? Ultimately, I don't think so, or at least not right at the moment. The stock is definitely cheap. Its trailing P/E ratio is in the single digits, and forward is about 10 times earnings. Yet, it's inexpensive for a reason. Sales continue to fall, and I need to see O'Neill implement a turnaround strategy that can truly revive the brand over the long term.
I do believe there's hope for Lululemon, but it's going to take some time for this brand to reinvent itself.
Catie Hogan has no position in any of the stocks mentioned. The Motley Fool recommends Lululemon Athletica Inc. The Motley Fool has a disclosure policy.