Michael Burry is confident Lululemon will recover despite the stock’s 48% crash this year.
- Michael Burry said he lowered his Lululemon valuation to reflect near-term growth uncertainty.
- He remains optimistic about Lululemon’s long-term recovery.
- Burry sold Lululemon shares to claim a tax benefit and temporarily switched to Deckers.
“The Big Short” fame Michael Burry said he lowered his valuation estimate for Lululemon Athletica (LULU) due to near-term growth uncertainty but remains confident the stock will recover. The investor said he does not want to assume overly optimistic growth expectations for the beaten-down athletic apparel maker.
Lululemon Athletica stock ticked 0.02% higher overnight, ahead of Tuesday. The stock has plunged over 48% so far this year and is on track for its worst year ever.
Burry Takes Cautious View On Lululemon’s Near-Term Growth
In his Substack chat, Michael Burry, the investor known for predicting the 2008 financial crisis, said his revised assessment on Lululemon reflects a cautious outlook rather than a loss of confidence.
Responding to a subscriber’s question about why he prefers Lululemon over Birkenstock (BIRK), despite the latter appearing to have a stronger competitive advantage and a cheaper valuation, Burry said he lowered Lululemon’s IV15 assessment to account for uncertainty around near-term performance. Burry said he lowered Lululemon’s IV15 assessment to reflect uncertainty around its near-term performance.
“I docked LULU a bit on the IV15 due to uncertainty but I think it will come back. I just don’t want to build the IV15 around an optimistic near term as far as growth, so I adjusted it.”
IV15 is Michael Burry’s way of estimating what a stock is worth today while targeting a 15% annual return. He uses this valuation method to find “Fat Pitches” — stocks that trade well below what he believes they could be worth over the long term as their businesses grow.
Burry’s Temporary Switch to Deckers From Lululemon
Earlier this month, Burry sold his Lululemon shares to book a tax loss and temporarily bought Deckers Outdoor (DECK) instead. He said he plans to buy Lululemon again after 30 days, once the IRS wash-sale restriction period ends.
Burry made the switch after Lululemon shares dropped to $91.28, their lowest level in more than eight years, amid weak sales and a reduced full-year outlook. He said Deckers would help him maintain similar market exposure during the waiting period because he expects both companies to benefit from the same recovery trends.
Lululemon shares have surged nearly 1,000% between 2017 and 2023 but have plunged 78% from their 2023 peak. The stock has continued to fall even after entering bear-market territory and becoming technically oversold.
LULU Stock: Retail View
On Stocktwits, retail sentiment around the stock slipped to ‘bearish’ from ‘neutral’.
LULU stock has crashed 48% year-to-date.
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