Lululemon Athletica Inc (NASDAQ: LULU), once the darling of all retail stocks, has endured one of the ugliest downtrends in the industry this year. Its shares are down about 60% from their January peak, and every bullish rally attempt in the nine months since has been beaten back by the bears. Even though its revenue sits close to all-time highs, and its price-to-earnings (P/E) ratio is the lowest it’s ever been, the stock is still trading back at 2019 levels.
The good news for those on the sidelines is that the disconnect is becoming harder to justify. After months of relentless selling, there are signs the bears might finally be running out of steam. The key question is whether Lululemon has finally found a bottom—or if the stock is entering another extended downtrend. There are two compelling reasons to believe a bottom may be in place, and one reason that suggests caution is still warranted.
