What Happened?
Shares of athletic apparel retailer Lululemon (NASDAQ: LULU) fell 3.2% in the afternoon session after investors took some profits off the table as markets awaited signals on future monetary policy from the Federal Reserve's Jackson Hole symposium later in the week.
The downturn in the market was largely attributed to a significant sell-off in megacap tech and chipmaker shares. Nvidia, Advanced Micro Devices (AMD), and Broadcom all saw notable drops, dragging down the VanEck Semiconductor ETF. Other major tech-related companies like Tesla, Meta Platforms, and Netflix were also under pressure. A key reason for this trend is that much of the recent market gains have been concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed.
The shares closed the day at $197.67, down 2.9% from previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Lululemon? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Lululemon’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock gained 3.1% on the news that the firm of renowned investor Michael Burry, known for his successful bet against the housing market before the 2008 financial crisis, disclosed a new stake in the company.
According to a regulatory filing, Burry's firm purchased 50,000 shares valued at nearly $11.9 million, making Lululemon 2.05% of its portfolio. This move by a high-profile value investor is drawing attention to the stock, which has fallen significantly from its previous highs. The interest may also be fueled by the company's own confidence, reflected in an aggressive $1.77 billion share buyback program over the past 12 months. This buyback, coupled with the stock trading at a five-year low price-to-earnings ratio, suggests that both management and prominent investors may see the athletic apparel maker as undervalued.
Lululemon is down 46.9% since the beginning of the year, and at $197.80 per share, it is trading 53% below its 52-week high of $421.16 from January 2025. Investors who bought $1,000 worth of Lululemon’s shares 5 years ago would now be looking at an investment worth $548.17.
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