Jim Cramer Thinks Lululemon Athletica Inc. (LULU) “Can Continue Making a Comeback”

We recently published a list of 8 Stocks on Jim Cramer’s Radar. In this article, we are going to take a look at where lululemon (NASDAQ:LULU) stands against other stocks on Jim Cramer’s radar.

A store employee in an athletic apparel store restocking merchandise.

Discussing apparel stocks, Cramer mentioned lululemon athletica inc. (NASDAQ:LULU) and said that he thinks “that it should be bought.”

“[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.”

lululemon (NASDAQ:LULU) designs and sells athletic apparel, footwear, and accessories for both women and men, and it focuses on products for activities like yoga, running, and training.

Overall, LULU ranks 6th on our list of stocks on Jim Cramer’s radar. While we acknowledge the potential of LULU as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than LULU and that has 100x upside potential, check out our report about this cheapest AI stock.

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