Latest news with #marketvalue
Yahoo
3 days ago
- Business
- Yahoo
Why Lululemon Athletica (LULU) Bulls Shouldn't Throw in the Towel Just Yet
Over the first six and a half months of this year, Lululemon Athletica (LULU) has lost approximately $20.4 billion in market value, as the company faces a perfect storm: rising competition, inventory challenges, and a core market that appears to be reaching maturity. While these issues demand serious attention and action from management, Lululemon remains a standout in the apparel sector with margins well above average and returns on capital far exceeding its cost of capital. Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter For some, buying into a stock that's still sliding feels like 'catching a falling knife,' but to me, the current price—the lowest in a decade—presents an apparent buy-the-dip opportunity, especially considering the company's solid cushion to potentially turn these structural headwinds around. There are plenty of reasons to be bullish on Lululemon at today's prices, despite its recent struggles. Things are messy for Lululemon stock right now. It has experienced a significant peak-to-trough decline, falling roughly 41% from its January high of $421 to around $247 today. And it got even worse after a double-digit drop following its latest earnings report on June 5, when the company slightly beat analysts' estimates. Lululemon's comparable sales were up just 1% year-over-year, with Americas comp sales down 2%, only partially offset by international comps up 6%. However, what really fueled the bearish reaction was the company's reduction of its full-year EPS guidance from $14.95–15.15 to $14.58–14.78 per share. In my view, these more cautious expectations reflect a combination of competitive pressure, potential product missteps, and a natural slowdown in the U.S. market. While Lululemon has historically handled competition well, new entrants in the premium athleisure space—such as Alo Yoga and Vuori—have been proliferating and capturing market share. There's also the issue of product assortment. Lululemon has struggled to consistently have the right products in stores. The company underwent changes in its design team, which may have contributed to inventory challenges and product shortages in U.S. locations. Most recently, the company reported that inventory increased by 23% in dollar value and 16% in volume, indicating it's carrying a significantly larger amount of product. That could help support future growth, but it could also backfire. If consumer demand doesn't keep up, markdowns may be needed, which would hurt margins. Above all, I think these issues have compounded to weaken performance in Lululemon's more mature markets. In the U.S. and Canada, where the brand is already well-established, future growth depends on innovation to avoid market saturation. So, when a product misses the mark, inventory builds up, and competition intensifies, the impact on sales is felt immediately. It's important to acknowledge that Lululemon's recent challenges aren't solely cyclical in nature. In fact, several appear to be structural—such as increasing competition in the premium athleisure space, market saturation in key regions like the U.S. and Canada, and issues related to product execution and inventory management. These are not short-term headwinds that will resolve on their own; they demand deliberate and strategic action from management. Even so, there are reasons to remain optimistic. Despite these hurdles, Lululemon maintains substantial profitability, with gross margins at 58.3% and operating margins of around 23%—well above those of its industry peers, such as Nike (NKE) and Adidas (ADDYY), which deliver ~10% and 6.5%, respectively. This margin strength provides the company with significant flexibility to navigate its current challenges while positioning for long-term growth. Even in this more challenging environment, Lululemon's ROIC over the last twelve months stands at ~23%, only slightly below the 25.5% achieved the previous year. And when you consider the company's cost of equity—using a beta of 0.8, a 10-year Treasury yield of ~4.3%, and an equity risk premium of around 4%—the cost of capital is near 7.5%. From that perspective, Lululemon is still generating strong value creation that exceeds its capital cost. Even with more cautious forecasts for bottom-line growth this year, I would argue that while ROIC may dip, it's too early to talk about structural deterioration in the company's core fundamentals. There's still a solid long-term story here, if execution improves. The bottom line is that Lululemon's stock is currently trading at 16.7x earnings, its lowest level in the past decade—at least—a significant drop from the 96x earnings multiple it reached back in 2020 and 65x in January last year. Based on my calculations, I believe Lululemon is undervalued by about 30% at today's price. Using a reverse DCF model and assuming the market consensus for the next five years top-line CAGR at 8%, with EBIT margins stabilizing around 23.3% (even though consensus expects considerable EPS growth over this period), I estimate Lululemon's free cash flow to the firm in year five years will be roughly $2.2 billion, assuming no changes in working capital. Bringing that back to present value and discounting at around 7.7%—a rate I find reasonable for a profitable, debt-free, and strong-brand business like Lululemon—and using a perpetuity growth rate of 2.5%, this implies an equity value of about $38.9 billion. That's comfortably above the current market cap of ~$30 billion. Despite some mixed views, the consensus among 29 analysts covering LULU over the past three months leans moderately bullish. Out of those, 15 recommend buying the stock, 12 suggest holding, and only two advise selling. LULU's average stock price target stands at $310.44, implying approximately 30% upside from the current share price over the coming twelve months. Lululemon must confront and resolve what increasingly appear to be structural headwinds in order to restore investor confidence and support a sustained recovery in its share price. The encouraging news is that, despite recent downward revisions to growth forecasts, the stock appears undervalued at current levels, provided the company can maintain at least modest revenue growth and stabilize its margins. For patient, long-term investors, this creates a compelling opportunity to capitalize on short-term weakness and establish or add to a position in LULU. Disclaimer & DisclosureReport an Issue Error al recuperar los datos Inicia sesión para acceder a tu cartera de valores Error al recuperar los datos Error al recuperar los datos Error al recuperar los datos Error al recuperar los datos
Bloomberg
4 days ago
- Business
- Bloomberg
Herbal Medicine Stock With No Sales Rallies 64,000%
A biotech stock focused on herbal medicine has surged by more than 64,000% so far this year and yet, the company itself has made zero revenue — much less turned a profit. The unbelievable rally has transformed Regencell Bioscience Holdings Limited, a penny stock as recently as April, to one worth more than $20 billion in market value. A year ago, the stock had a market capitalization of just $53 million. This is despite the company having a net loss of $4.4 million for its fiscal year that ended June 2024, a 28% decrease from the previous year.
Bloomberg
09-06-2025
- Business
- Bloomberg
Zaslav Reverses Course on Merger That Lost $40 Billion in Value
Just three years after arguing that the best way to boost the value of Warner Media and Discovery Inc. was to combine their assets, Chief Executive Officer David Zaslav is now saying that the real key to unlocking their potential worth is to split them apart. The stock has declined about 60% since that merger was completed in April 2022, wiping out some $40 billion from the company's market value.
Bloomberg
09-06-2025
- Business
- Bloomberg
Australia to Shorten IPO Process by a Week to Attract Listings
The Australian Securities Investment Commission will begin testing a more streamlined process for local initial public offerings to encourage more companies to list in the country. The trial, which begins today, should shave a week off the IPO process — from about 20 weeks now — by having the corporate watchdog review documents earlier, ASIC said in a statement. Only companies that will have a market value of over A$100 million ($65 million) will be eligible to participate in the pilot.
Yahoo
09-06-2025
- Automotive
- Yahoo
BYD Unleashes an EV Industry Reckoning That Alarms Beijing
(Bloomberg) -- The price war engulfing China's electric vehicle industry has already sent share prices tumbling and prompted an unusual level of intervention from Beijing. The shakeout may just be getting started. Next Stop: Rancho Cucamonga! Where Public Transit Systems Are Bouncing Back Around the World Trump Said He Fired the National Portrait Gallery Director. She's Still There. ICE Moves to DNA-Test Families Targeted for Deportation with New Contract US Housing Agency Vulnerable to Fraud After DOGE Cuts, Documents Warn For all the Chinese government's efforts to prevent price cuts by market leader BYD Co. from turning into a vicious spiral, analysts say a combination of weaker demand and extreme overcapacity will slice into profits at the strongest brands and force feebler competitors to fold. Even after the number of EV makers started shrinking for the first time last year, the industry is still using less than half its production capacity. Chinese authorities are trying to minimize the fallout, chiding the sector for 'rat race competition' and summoning heads of major brands to Beijing last week. Yet previous attempts to intervene have had little success. For the short term at least, investors are betting few automakers will escape unscathed: BYD, arguably the biggest winner from industry consolidation, has lost $21.5 billion in market value since its shares peaked in late May. 'What you're seeing in China is disturbing, because there's a lack of demand and extreme price cutting,' said John Murphy, a senior automotive analyst at Bank of America Corp. Eventually there will be 'massive consolidation' to soak up the excess capacity, Murphy said. For automakers, relentless discounting erodes profit margins, undermines brand value and forces even well-capitalized companies into unsustainable financial positions. Low-priced and low-quality products can seriously damage the international reputation of 'Made-in-China' cars, noted the People's Daily, an outlet controlled by the Communist Party. And that knock would come just as models from BYD to Geely, Zeekr and Xpeng start to collect accolades on the world stage. For consumers, price drops may seem beneficial but they mask deeper risks. Unpredictable pricing discourages long-term trust — already people are complaining on China's social media, wondering why they should buy a car now when it may be cheaper next week — while there's a chance automakers, as they cut costs to stay afloat, may reduce investment in quality, safety and after-sales service. Auto CEOs were told last week they must 'self-regulate' and shouldn't sell cars below cost or offer unreasonable price cuts, according to people familiar with the matter. The issue of zero-mileage cars also came up — where vehicles with no distance on their odometers are sold by dealers into the second-hand market, seen widely as a way for automakers to artificially inflate sales and clear inventory. Chinese automakers have been discounting a lot more aggressively than their foreign counterparts. BofA's Murphy said US automakers should just get out. 'Tesla probably needs to be there to compete with those companies and understand what's going on, but there's a lot of risk there for them.' Others leave no room for doubt that BYD, China's No. 1 selling car brand, is leading the way on price cuts. 'It's obvious to everyone that the biggest player is doing this,' Jochen Siebert, managing director at auto consultancy JSC Automotive, said. 'They want a monopoly where everybody else gives up.' BYD's aggressive tactics are raising concerns over the potential dumping of cars, dealership management issues and 'squeezing out suppliers,' he said. The pricing turmoil is also unfolding against a backdrop of significant overcapacity. The average production utilization rate in China's automotive industry was mere 49.5% in 2024, data compiled by Shanghai-based Gasgoo Automotive Research Institute show. An April report by AlixPartners meanwhile highlights the intense competition that's starting to emerge among new energy vehicle makers, or companies that produce pure battery cars and plug-in hybrids. In 2024, the market saw its first ever consolidation among NEV-dedicated brands, with 16 exiting and 13 launching. 'The Chinese automotive market, despite its substantial scale, is growing at a slower speed. Automakers have to put top priority now on grabbing more market share,' said Ron Zheng, a partner at global consultancy Roland Berger GmbH. Jiyue Auto shows how quickly things can change. A little over a year after launching its first car, the automaker jointly backed by big names Zhejiang Geely Holding Group Co. and technology giant Baidu Inc., began to scale down production and seek fresh funds. It's a dilemma for all carmakers, but especially smaller ones. 'If you don't follow suit once a leading company makes a price move, you might lose the chance to stay at the table,' AlixPartners consultant Zhang Yichao said. He added that China's low capacity utilization rate, which is 'fundamentally fueling' the competition, is now even under more pressure from export uncertainties. While the push to find an outlet for excess production is thrusting more Chinese brands to export, international markets can only offer some relief. 'The US market is completely closed and Japan and Korea may close very soon if they see an invasion of Chinese carmakers,' Siebert said. 'Russia, which was the biggest export market last year, is now becoming very difficult. I also don't see Southeast Asia as an opportunity anymore.' The pressure of cost cutting has also led analysts to express concern over supply chain finance risks. A price cut demand by BYD to one of its suppliers late last year attracted scrutiny around how the car giant may be using supply chain financing to mask its ballooning debt. A report by accounting consultancy GMT Research put BYD's true net debt at closer to 323 billion yuan ($45 billion), compared with the 27.7 billion yuan officially on its books as of the end of June 2024. The pain is also bleeding into China's dealership network. Dealership groups in two provinces have gone out of business since April, both of them ones that were selling BYD cars. Beijing's meeting with automakers last week wasn't the first attempt at a ceasefire. Two years ago, in mid 2023, 16 major automakers, including Tesla Inc., BYD and Geely signed a pact, witnessed by the China Association of Automobile Manufacturers, to avoid 'abnormal pricing.' Within days though, CAAM deleted one of the four commitments, saying that a reference to pricing in the pledge was inappropriate and in breach of a principle enshrined in the nation's antitrust laws. The discounting continued unabated. --With assistance from Yasufumi Saito and Chester Dawson. The SEC Pinned Its Hack on a Few Hapless Day Traders. The Full Story Is Far More Troubling Cavs Owner Dan Gilbert Wants to Donate His Billions—and Walk Again Is Elon Musk's Political Capital Spent? What Does Musk-Trump Split Mean for a 'Big, Beautiful Bill'? Cuts to US Aid Imperil the World's Largest HIV Treatment Program ©2025 Bloomberg L.P.
