Jim Cramer Notes lululemon athletica inc. (LULU) Stock is “Just Too Cheap”

We recently published a list of Jim Cramer’s Game Plan: 9 Stocks in Focus. In this article, we are going to take a look at where lululemon athletica inc. (NASDAQ:LULU) stands against other stocks that Jim Cramer discusses.

lululemon athletica inc. (NASDAQ:LULU) was part of Cramer’s game plan, and he commented:

“lululemon, there you go, ton of business in China, and as a matter of fact, it’s actually been a real bright spot. We did a piece earlier in the week that said that this could be a bottom for the stock, and I think it’s just too cheap. I’m sticking by that judgment.”

lululemon athletica (NASDAQ:LULU) creates and sells athletic clothing, footwear, and accessories for men and women. The company’s products are made for activities such as yoga, running, and training. On May 28, Cramer said:

“[The stock] sold off some more after Liberation Day because Lulu has a huge manufacturing presence in Vietnam, which was set to be hit with a 46% tariff…. Once those reciprocal tariffs got delayed, Lulu was able to mount a comeback. But can this rebound continue? I’m cautiously optimistic. I’m going to tell you why. First, I’m still hopeful that the tariffs on Vietnam won’t end up being anywhere near that 46% level that was announced on Liberation Day…

Second, I also believe that the consumer’s doing better than most of Wall Street seems to assume, in keeping with that much stronger-than-expected consumer sentiment number we just got yesterday. Even when consumer sentiment looked terrible, actually consumer spending never really took a hit, though…. The company has a strategic plan in place, which is focused on product innovation, the guest experience, and the market expansion. They’re very rigorous about this. They’ve been doing this for a couple of years. It’s been paying off…

Unlike the setup for the previous quarter where expectations were sky high after Lulu had raised its outlook just a couple weeks before the quarter ended, expectations feel very low right now. Oh, I like this setup…

I think it should be bought, given that expectations for the company are now lower than at any point dating back to mid-2024, which was a great time by the way to buy LULU. This is reflected in the company’s forward price-to-earnings ratio, which currently stands at just 21 times earnings. That’s nearly a 50% discount to the stock’s average valuation over the past five years. Good timing.

So the bottom line: lululemon is a beaten-down retail that I think can continue making a comeback. We’ll see what happens next week, but for the time being, I am inclined to take a chance here. Maybe do it with call options, deep in the money. Why not? The expectations for lululemon are so low that the risk-reward seems pretty skewed to the upside.”

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Disclosure: None. This article is originally published at Insider Monkey.