LULU is a good buy; low valuation, profitability, and potential PE takeover/CEO turnaround offer upside.

Anyway, Lululemon has become a " lemon" and is now less than 100. I don't know where it will open today, but it's always an interesting story . What happened?

Well, we have revenues finally declining significantly, by 4%. Comparative sales are down by 9%. If you compare it to the previous quarter, it was bad, but not that bad. It was still a growing company.

Comparable sales were also high. If you compare it to 2024, it looked much better with higher profits.

We recently discussed the sportswear industry, looked at Nike, Lululemon, and On, and concluded that ultimately it comes down to customer preferences first, what will be popular that year, what will grow, and what won't grow, and that's very, very difficult to predict.

Something is popular one year, and something else the next year.

The problem is that people buy those popular stocks, and then they are surprised when stocks like Nike drop by 75% or Lululemon by 80% when the trend changes.

However, we also said that at some point things get so bad that they have to represent value. Let's discuss that. The market value now, after a decrease of 18%, will be 11 billion.

The price-to-earnings ratio will be eight, and is likely to be around 10 based on forecasts.

Looking at the situation, yes, sales have decreased by 12%. International sales also declined. There were some problems in China. However, profits are still there, and the company is still profitable.

There are some tax refunds, okay. They also carried out share buybacks. Overall, the company remains profitable. The company still exists. Inventories are not experiencing a surge, so they are managing that well.

Revenue forecasts continue to decline, with a double-digit drop. This is a big deal for a company to say about the year. Earnings are still $9 per share. Even if the situation is terrible next year, they will make about five or six dollars in profit.

But net income is still there. So, what is this all about ? A decrease of 20%.

Looking at the earnings call, revenue grew by only 4% in China. This is because they made a big mistake by using Japanese drums at their main Chinese event this year. This happened in June.

Therefore, this effect should be greater because the quarter ended in July. So, the revenue is much lower than expected. This effect is likely to extend to this quarter as well.

But then, I took a quick look at the conference call. What can one say? Comfortable "Scupa" clothing , " Superloft" fabrics, premium "Metal Vent" technical shirts , and golf apparel.

Min Woo Lee and Lewis Hamilton . Things are starting to get crazy. " Prezi" thick studio pants. Of course, the company is suffering from a 10% drop in sales . However, it can be described as a rather slow start.

But we are talking about a company that was growing. If things settle down at some point, people will love these high-end and stylish products. We still maintain accumulated revenues, accumulated net income and free cash flows exceeding one billion.

The guidance still points to earnings per share of nine. That might be slightly less. I don't know, maybe seven. This is based on analysts' forecasts for next year multiplied by 15, and here it approaches the current price.

The new CEO will do her best to refresh things. Trends are always changing. The stock is cheap, yes, and there is a possibility of it being acquired by a private equity firm. If you look at the owners, they are founders, so it might go that way .

The problem is that those who bought at 500, or 400, or 300, or 200 will not be happy with a takeover deal at 120 or 130, which is a price that a private equity firm may be willing to pay. 13 to 15 billion versus one billion in cash flows.

1.5 Great buy deal. Perhaps even 20 billion, which would be equivalent to a price of 200. So, from this perspective, the ugly situation is getting uglier to the point that it might become a real investment opportunity.

A safety margin of 1.5 billion in cash, market capitalization, a profitable company, a strong brand, and a potential upside of 50% or more if the CEO is employed to sell the company.

So, something will happen. This could be the worst time.

Perhaps in the next quarter the CEO will take radical and comprehensive measures. Trying to restore balance by introducing everything new. We'll see what her plan is. However, there is no better situation.

It's Michael Perry's biggest investment. He will double his bet at a price of 100 or less. I don't know how much he practices yoga, but maybe some of those quirky "Dans Studio" pants will help him make a better decision.

Personally, I said that I don't need this kind of disruption in my life. So, for me no, but it certainly looks like a good buy.