Lululemon Athletica Inc (NASDAQ:LULU) and Nike Inc (NYSE:NKE) are navigating similar consumer slowdowns, but the stock market is treating them like entirely different businesses. One trades like a premium franchise. The other trades like a value stock — despite stronger margins, cleaner execution, and now activist pressure.
- Track LULU stock here.
That disconnect is why Elliott Management‘s $1-billion stake purchase grabbed investor attention.
LULU Vs. NKE: A Tale Of Two Stocks
Lululemon’s stock is still down sharply year to date, even after a powerful rebound over the past month. The shares remain well below their 52-week-high, reflecting investor skepticism around near-term growth.
Nike, by contrast, has experienced a much milder decline and trades closer to its annual range, despite its own demand and inventory challenges.
Momentum has recently shifted toward Lululemon, but valuation still tells a much bigger story.
Valuation Gap Is Stark
Lululemon trades at roughly 14x trailing earnings and about 16x forward earnings, with an EV/EBITDA near 8.5x. Nike trades at more than 33x trailing earnings, over 40x forward earnings, and an EV/EBITDA north of 23x.
That’s a dramatic premium for Nike, even though Lululemon generates materially higher operating margins and stronger returns on capital. On a PEG basis, Lululemon sits near 1, while Nike’s valuation implies much richer growth assumptions.
Read Also: Nike’s ‘Win Now’ Strategy Shows Early Wins, But Q2 Earnings Expected To Slip
Margins Versus Multiple
The market appears to be pricing Lululemon as if its growth challenges are structural. But even with softer near-term earnings expectations, the company still delivers industry-leading profitability and maintains balance-sheet flexibility.
Nike, meanwhile, continues to command a premium multiple despite margin pressure and a more complex turnaround narrative.
Why Elliott Matters
Elliott’s involvement reframes Lululemon as a re-rating candidate rather than a broken growth story. Leadership refresh, buybacks, and underpenetrated international and men’s categories offer clear levers for improvement.
If those levers work, the valuation gap relative to Nike looks increasingly difficult to justify.
Read Next:
Image: Shutterstock
Recent Comments