Lululemon Athletica Inc. ( LULU ) heads into its third-quarter earnings report as a battleground stock. Recently revealed as a high-conviction contrarian pick by ‘Big Short’ investor Michael Burry—who views the 2025 sell-off as “window dressing”—the company nonetheless faces an immediate financial hurdle.

Check out LULU’s stock price here.

Michael Burry’s Four Picks

Burry, in a post on his Substack on Nov. 27, revealed the four stocks that he currently owns and likes, including LULU.

The ‘De Minimis’ Margin Drag

Management has explicitly warned that the third quarter will be the first to bear the full brunt of new tariff rates and the removal of the “de minimis” duty exemption, posing a severe test for profit margins.

Yet, despite these substantial near-term headwinds, some experts argue this “retail bellwether” is now deeply undervalued and poised to rebound toward $300 over the next two years.

During the second-quarter earnings call, CFO Meghan Frank stunned investors by detailing a projected 220 basis-point hit to gross margin for the full fiscal year, driven largely by the removal of the de minimis exemption, which previously allowed duty-free shipments on U.S. e-commerce orders.

This regulatory squeeze arrives as CEO Calvin McDonald admitted the U.S. business has stalled due to a lack of product “newness,” with U.S. revenue flat to down in the second quarter.

Consequently, management lowered full-year revenue guidance to a range of $10.85 billion to $11 billion. Analysts are bracing for these combined pressures to weigh heavily on the third-quarter print, with consensus EPS estimates hovering around $2.21 and $2.48 billion in revenue, as per Benzinga Pro.

See Also: Lululemon Stock Tumbles On Mixed Q2 Earnings, Lower Guidance

Path To $300: Valuation And International Growth

Despite the gloom, bulls see a massive opportunity created by the sell-off. With the stock trading near a historical low valuation of approximately 14x earnings, senior portfolio manager Michael Hakes, at Murray Wealth Group, argues the market is pricing LULU as a zero-growth asset.

Hakes told BNN Bloomberg that if the U.S. market merely stabilizes, continued dominance in international markets—where China grew revenue 25% in the second quarter—could push the stock to $300 within two years.

Further supporting the long-term view, market expert Louis Navellier of Navellier & Associates calls Lululemon a “retail bellwether” with a history of incredible earnings surprises, suggesting the current pessimism may be overstated.

LULU Underperforms In 2025

It closed 0.05% lower at $182.30 apiece on Wednesday and rose by 0.0055% in after-hours. It has declined by 52.33% year-to-date and 46.49% over the year.

It maintains a weaker price trend over the medium and long terms and a strong trend in the short term, with a poor quality ranking. Additional performance details, as per Benzinga’s Edge Stock Rankings, are available here.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.