Lululemon faces severe headwinds and negative growth but offers significant upside potential if management executes a turnaround; Michael Burry's continued buying supports this contrarian view.

For example, Lululemon is the top investment from Michael Burry.

Now, we start things off by looking at Lululemon, the yoga pants company, and this one is in a lot of trouble. The stock price continues to plummet. In fact, when we look at Lululemon this year, it's quite literally one of the worst performing stocks of the year.

Year-to-date, it's down 51%. If we zoom out in the past trailing year, it's down 38%. The past 5 years, check this out. Lululemon is down 76%.

What's happening with Lululemon today is that the stock is going through a very troubling time. So, if we look at the revenue growth, this company was growing revenue continually in the 15% to 20% per year after COVID, after the 2020 bump, it gained a ton of market share.

This period of time, Lululemon was unstoppable. I saw it all through the internet, on Reddit, on X, on every stock forum, on every Discord, people were talking about Lululemon.

This unstoppable clothing company, it's the new Nike. The story had a lot of magic in it at the time.

But then, things started to change. Operations shifted. The management screwed up big time. A lot of competitors started mimicking their product. You had Alo Yoga, you had Vuori imitating their products and making even different variations of it.

Companies like Costco sold dupes of Lululemon. And the growth started to slow down. In fact, the growth over just the past year has basically flattened out to be low inflation.

The revenue hasn't only slowed down over the past year, it continues to decelerate and even go into the negative. In fact, the forecast for this upcoming year are minus 11% EPS growth.

So, EPS are going to decline and minus 1% revenue growth. So, while the growth has heavily slowed down, it's decelerated and it's even going into the red, we have investors abandoning the stock.

And that's what's pushing down the price. And it's also pushing down the multiples that the stock trades at today. The forward PE ratio over the next 12 months is 11.9. And that's assuming earnings per share shrinking.

These valuations are well below commodity multiples, meaning that Lululemon is currently being priced for capital destruction.

Michael Burry is one of them. In fact, Michael Burry has been interested in Lululemon for quite a while. In fact, going back to 2025 when he was still managing his fund, he had Lululemon as a 32% position.

The average share price was 177. So, the shares are roughly down 45% since the purchase price of this fund. We also have a more recent update. In February of 2026, he's no longer managing his fund, he's just managing his own money and he's running a blog.

Michael Burry said that Lululemon has pulled back and I'm adding to my position a bit. So, Michael Burry was buying the stock at 177 earlier this year with his own personal money.

And he said that he would load the truck if the stock falls below 150. Right now, it's $100 per share. So, it's substantially down below his own cost basis. And Michael Burry hasn't been discouraged by this.

In fact, he's continued to double and triple down on this, continuing to buy more and more Lululemon. His most recent indications are that he's still overwhelmingly bullish on this company.

And in fact, it's now his largest position in his personal account.

The biggest one is that he believes Lululemon is a much better brand than a management team. Meaning that the brand of Lululemon is actually great. It's a great product, it's super high quality, it's well loved by very affluent people.

It's just a great brand, but the management has stunk. He believes that the management is terrible and they've mismanaged an incredible brand.

Even with the Lululemon, here are the ads that were running a year or so ago. This is what they looked like. Now, we have on the left here Vuori and Alo Yoga. These are the two biggest competitors, direct competitors to Lululemon.

These are the type of ads they were running. The way that they were presenting their product. On the right, we have Lululemon. This was is a real ad. This is not AI. This is just a a year or so ago.

It's a a grandma, like a a very old lady, 78 years old, influencer working out in Lululemon pants. And this is just one example, which is a marketing issue. I could go through far more to tactical and navigation mistakes that Lululemon has done.

So, part of the thesis here is that Lululemon actually has still a great product. And if management gets back on track, if they really do real marketing, real product design, and they become more relevant, they will take back market share.

They'll earn back the trust of their customers, and the stock could have a big bounce because of that. They could re-accelerate growth once again.

But, there's other factors to this stock. For example, we looked once at the valuation, but if we look at this again, it already implies a lot of the problems. The deceleration in growth, the marketing issues, the product design, all of that is baked into the stock today.

So, people like Michael Burry argue that this company's already priced as a bad company. And if they have any type of positive momentum, any type of turnaround, it could be massive both in Lululemon stock and in others.

And there's another thing that a low valuation does. It makes it so that the company can buy back its own shares at increasingly attractive prices. This is the game that Salesforce eventually did.

They took out leverage to buy back their own shares. When we look at the share count over time, we can see that Lululemon could arguably do the same thing. They're already reducing the share count by over 5% per year, which is very big.

Retiring all of those shares out of the float makes it so that when you own a share, you actually own a bigger percentage of the company. And they could accelerate this. I could see Lululemon going from 5% share reduction to 7% to 10% per year.

In fact, they could push this upwards of above 10% share count reduction per year because they have very low dilution, they have very low stock-based comp.

And another thing is that Lululemon has an incredibly powerful balance sheet. Now, we have here a lot of capital leases. Those are like lease agreements in malls, but that's more of an ongoing expense.

When you look at the amount of cash they have, it's at 1.39 billion. So, they do have some financial flexibility here. And if they wanted to, they could use some of this cash to buy back shares if their shares get attractive enough.

The biggest factor to look at with Lululemon is deciding whether or not this problem in the company is temporary or permanent. But if you think there's a chance that they can reaccelerate growth, recover their marketing, get back on track to any degree, this one could have a massive turnaround.