Will I invest in Lululemon (LULU Stock) now, after a -70% drop?

Key Concepts

• Lululemon Stock Analysis
• Trading vs. Reinvesting
• Short-term vs. Long-term Outlook
• Valuation Methods (Oracle Value, Discounted Cash Flow, Discounted Free Cash Flow)
• Intrinsic Value Calculation
• Reversal Patterns

Lululemon Stock: Trading Opportunity and Valuation

The speaker expresses a lack of interest in reinvesting in Lululemon stock for the long term, citing skepticism about its long-term durability. However, they are keen to trade the stock when it reaches an opportune price and exhibits a reversal pattern. The rationale for this trading interest stems from the belief that Lululemon is currently undervalued in the short term, making it "too cheap to ignore."

Valuation Analysis

To quantify how cheap Lululemon stock is, the speaker presents several valuation metrics:

• Oracle Value: This is a proprietary valuation method calculated by the speaker's algorithm. The calculated intrinsic value using this method is $273.83.
• Discounted Cash Flow (DCF) Method: Based on this traditional valuation approach, Lululemon is estimated to be worth $292.
• Discounted Free Cash Flow (DFCF) Method: Using this variation of DCF, the intrinsic value is calculated to be $182.

Synthesis and Conclusion

The speaker's current stance on Lululemon stock is that while its long-term prospects are viewed with caution, its current market price presents a compelling short-term trading opportunity due to significant undervaluation across multiple valuation models. The discrepancy between the different intrinsic value calculations ($273.83, $292, and $182) suggests a range of potential values, but all indicate a price point below the current market price, making it attractive for short-term trading once a reversal pattern is identified.