Shares of Lululemon Athletica (NASDAQ:LULU | LULU Price Prediction) jumped 7% on December 18 following news that activist investor Elliott Management built a $1 billion stake in the athleisure retailer. The move sparked a surge in retail trader enthusiasm on Reddit, with sentiment scores climbing to 72 (bullish) from neutral levels just days earlier. The Elliott news arrives as Lululemon recovers from a brutal year, with shares down 44% over the past 12 months but up 31% in the last month alone.
The stock’s decline reflects broader concerns about tariff exposure and competitive pressure. Lululemon sources heavily from Asia, making it vulnerable to trade policy shifts that compress margins. The company’s gross margin fell 290 basis points to 55.6% in Q4 2024, while Americas revenue declined 2% year-over-year. Yet international sales surged 33%, and the company beat revenue estimates by $90 million, signaling resilience beneath the surface noise.
Reddit Traders See Value After the Selloff
The Elliott stake ignited discussion on Reddit, where traders highlighted three reasons for optimism:
- Lululemon trades at just 15x earnings compared to Nike (NYSE:NKE) at 34x, despite superior profit margins of 15.7% versus Nike’s 6.2%
- Elliott’s backing of Jane Nielsen, former CFO and COO at Ralph Lauren, as a potential CEO replacement signals strategic focus
- The stock sits 49% below its 52-week high of $423.32, creating a compelling entry point for contrarians
Lululemon +5% after hours as Elliott builds $1B stake
by u/callsonreddit in wallstreetbets
As one Reddit user put it, “the stock has rallied, rising about 11%, since Friday when the athletic-wear maker boosted its full-year outlook and announced that McDonald would depart.” Another trader noted, “LULU is trading at a significant discount compared to its historical valuation and peers like Nike, making it an attractive value play.”
Momentum Builds Despite Analyst Caution
Wall Street remains skeptical, with 29 of 35 analysts rating Lululemon a hold. The consensus price target of $206 sits below the current $215 level, suggesting limited upside in their view. Yet retail traders see what analysts may be missing: a profitable company with 41% return on equity, growing international presence, and a valuation gap that screams opportunity. The setup has captured attention from traders betting the worst is behind Lululemon, whether tariff headwinds ease or Elliott’s involvement drives operational improvements.
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