Michael Burry calls Lululemon his portfolio trickster: why he is buying the crash

Michael Burry is buying exactly what Wall Street wants nothing to do with.

Lululemon stock NASDAQ:LULU has lost more than half its value this year after weak product launches, falling Americas sales and another guidance cut pushed the stock below $100 for the first time since 2018.

Yet Burry has called Lululemon the “trickster” in his portfolio and said he would buy more below $100.

His wager is not that the turnaround is working, but that the market may be pricing today’s problems as permanent.

Burry is buying the valuation collapse, not an earnings recovery

Lululemon once traded as a premium growth stock. After Friday’s 17.4% slump to $99.10, the shares are down almost 80% from their all-time high.

In a Substack post, Burry called Lululemon his portfolio’s “trickster” and said it was his largest position.

He acknowledged the latest quarter had worsened assumptions for US and China growth but did not abandon the thesis.

Yahoo Finance reported that Burry intended to add below $100. He has argued that bad management can create value opportunities when a durable business survives operational mistakes.

Wall Street is less forgiving. JPMorgan analyst Matthew Boss cut his target by 38% to $95 from $154 while keeping a Neutral rating.

The disagreement is stark, as Burry sees sub-$100 as an opportunity, while JPMorgan’s target suggests the price may simply reflect weaker earnings power.

Wall Street fears this is becoming a brand problem

Lululemon’s latest numbers make the bearish case difficult to dismiss.

Fiscal second-quarter revenue fell 4% to $2.42 billion, while comparable sales declined 9%. Americas revenue dropped 8%, and comparable sales there fell 12%.

Management cut full-year revenue guidance to $10.35 billion-$10.5 billion from $11 billion-$11.15 billion and reduced its earnings outlook to $9.48-$9.73 a share.

Reported quarterly EPS of $2.92 also included an $0.86 benefit from tariff refunds.

The concern is increasingly about product relevance rather than one weak quarter. Competition from Alo Yoga and Vuori has intensified, while Lululemon has acknowledged inconsistent responses to recent launches.

Barron’s reported that Jefferies analyst Randal Konik said incoming CEO Heidi O’Neill has “a mountain to climb,” arguing that brand momentum is fading and market-share losses are mounting.

UBS cut its target to $106 from $120, citing weak traffic, an assortment that is not resonating and the risk of further earnings pressure.

A new CEO gives Burry’s bet its first test

O’Neill is due to take over as chief executive on Tuesday after months of leadership uncertainty.

The former Nike executive brings experience across product, merchandising and brand strategy. But she inherits shrinking Americas sales, weaker margins, tougher competition and lower investor confidence.

Morningstar analyst David Swartz still sees value. After the latest results, he said Lululemon shares remained attractive despite the guidance cut and maintained that the company has a meaningful brand asset that can support premium pricing.

That view is much closer to Burry’s thesis.

Lululemon does not need to return immediately to its old hypergrowth days for the stock to work. It needs O’Neill to stabilise sales, restore product relevance and show that today’s earnings decline is temporary rather than structural.