Investing in equities during market downturns can serve as a prudent strategy for those focused on long-term wealth creation. Purchasing shares in companies with robust fundamentals at discounted prices not only lowers the average cost per share but also positions the investor to benefit from amplified returns when markets rebound. While equity markets exhibit volatility in shorter time frames, their general trajectory over extended periods tends upward.
Buying assets that remain fundamentally sound but are temporarily undervalued due to market sentiment swings or news overreactions represents a strategic approach for portfolio construction. This article examines two companies that have experienced substantial stock price declines yet present core business strengths and potential for future prosperity: Lululemon Athletica and Zebra Technologies.
Lululemon Athletica: Navigating Headwinds Amid Global Expansion
Lululemon Athletica Inc., a leading player in premium women's activewear, has seen its stock decrease approximately 45% over the past twelve months. Several factors have contributed to this decline: slowing sales growth in its primary North American market, heightened competition within the athleisure sector, margin pressures linked to tariff impacts, and a significant leadership transition.
In mid-December, the company announced that CEO Calvin McDonald would step down effective January 31, 2026, after nearly seven years in this role. During the search for a successor, CFO Meghan Frank and Chief Commercial Officer André Maestrini will share interim co-CEO responsibilities. The activist investment firm Elliott Management has acquired a sizeable position in Lululemon and reportedly influences the decision regarding the forthcoming CEO appointment. Investors await clarity on the leadership direction ahead.
Current challenges affecting Lululemon partly stem from broader economic conditions. A softening economy has dampened consumer discretionary spending, including on higher-priced athleisure apparel. This is reflected in Lululemon's reported 2% decline in net revenue within the Americas region during the third quarter, alongside a 5% decrease in comparable-store sales. These figures indicate the brand's core market is under pressure amid cautious consumer behavior.
Conversely, the company's international business represents a significant growth avenue. During the third quarter, international net revenue surged 33%, with particularly strong gains of 46% in China and 19% across the rest of the world segment. This expansion helps counterbalance North American softness and evidences Lululemon's inroads into less saturated markets.
Strategically, Lululemon is addressing product-related concerns by speeding development cycles and planning to refresh 35% of its spring 2026 lineup with new styles. The brand fosters strong customer loyalty through community engagement that includes in-store events and utilizing local fitness ambassadors instead of traditional celebrity endorsements, a tactic that cultivates brand advocacy while controlling marketing expenditures.
The company's competitive positioning relies on offering high-quality, technically sophisticated fabrics and functional designs that support premium pricing and preserve healthy gross margins near 58.35%. By operating through company-owned retail locations and a solid e-commerce platform, Lululemon maintains pricing power, effective inventory management, and robust profitability.
Financially, Lululemon boasts a strong balance sheet with over $1 billion in cash reserves and no long-term debt, providing resilience and flexibility for strategic opportunities such as share repurchases. The company demonstrated profitability in the third quarter, generating approximately $306.8 million in net income, while achieving a 7% year-over-year revenue increase. Its return on invested capital, an important indicator of efficient capital allocation, remains high around 30%.
From a valuation standpoint, the steep share price decline in 2025 has resulted in a forward price-to-earnings ratio near 15, significantly lower than its historical average exceeding 30. This reduction implies that many of the concerns facing the company may be already reflected in the current stock price. Investors willing to endure potential short-term volatility amid the leadership transition and evolving growth strategies may find this an opportune moment to consider Lululemon stock.
Zebra Technologies: Positioned for Growth Amid Industry Transformation
Zebra Technologies Corporation, a provider of hardware, software, and services enabling digital transformation and workflow automation for frontline operations, has experienced a nearly 37% decline in stock value compared to the previous year. The company's core competencies include smart data capture and enterprise asset intelligence, facilitating real-time tracking and management of assets, personnel, and transactions.
Zebra's revenue streams derive from sales of hardware devices, software subscriptions, supplies such as labels and ribbons, and service agreements. Its business is split primarily between two segments: Enterprise Visibility & Mobility (EVM), accounting for about two-thirds of total revenue, and Asset Intelligence & Tracking (AIT).
The EVM segment specializes in rugged mobile computing units, data capture technologies, and associated software solutions. In the third quarter, this segment generated net sales of approximately $865 million, contributing significantly to the company's total revenue of $1.32 billion, which represents a 5% increase over the prior year's comparable period.
The AIT segment, focusing on barcode printing, asset tracking, location solutions including RFID technology, and related supplies and services, reported $455 million in net sales. Zebra's offerings continue to see strong demand as enterprises accelerate adoption of automation, digitalization, and real-time operational insights.
The company's technology is widely adopted, with over 80% of Fortune 500 firms utilizing Zebra's platforms, reflecting the entrenched and expanding presence within multiple industries such as retail, healthcare, manufacturing, and logistics.
Over recent years, Zebra Technologies has enhanced its expertise in foundational artificial intelligence, particularly in areas such as machine vision and scanning. More recently, the company has fast-tracked development and introduction of AI tools and sophisticated applications. This includes integrating advanced chipsets into forthcoming handheld and wearable products to facilitate edge AI processing capabilities and developing associated software, AI agents, and companion applications.
An example of these efforts is Zebra Companion, a multimodal generative AI agent suite designed to assist frontline workers by providing intelligent, immediate answers to complex questions. Pilot programs in retail and transportation/logistics aim to validate the utility of these AI solutions, with broader commercialization and revenue contributions expected to commence in 2026.
As part of strategic realignment, Zebra has elected to exit its autonomous mobile robotics division, indicating a refining of focus on areas with greatest growth potential. While undergoing this transition, the company’s long-term prospects hinge on its AI pivot and position within critical enterprise technology markets.
For investors attracted to Zebra Technologies’ growth narrative and its AI-driven roadmap, the current stock price decline might represent an opportunity aligned with a longer investment horizon.
Key Points
- Market volatility can present chances to buy quality stocks at discounted valuations enhancing long-term returns.
- Lululemon's stock has fallen roughly 45% over the last year due to slowing North American sales, competition, tariffs, and a CEO transition.
- Despite North American weakness, Lululemon's international revenue increased strongly, especially in China and other markets.
- The company’s strong brand loyalty, premium product positioning, and solid balance sheet support its resilience and growth potential.
- Zebra Technologies’ shares have declined about 37% year-over-year amid ongoing business transition and AI integration efforts.
- Zebra serves a broad range of industries with hardware and software that digitize frontline workflows and track assets in real time.
- AI-enhanced product development, including edge AI processing and generative AI applications, will drive Zebra’s future revenue starting in 2026.
- Both companies offer compelling long-term growth prospects despite recent share price declines, appealing to investors willing to endure short-term uncertainty.
Risks and Uncertainties
- Economic slowdown may continue to suppress consumer discretionary spending impacting Lululemon's core market sales.
- Leadership change at Lululemon creates uncertainty around strategic direction and execution during the transition period.
- Competitive pressures in the athleisure and apparel industry could affect pricing power and market share.
- Tariffs and other supply chain disruptions may continue to pressure margins for Lululemon.
- Zebra Technologies faces risks related to its ongoing business transformation, including successful execution of its AI strategy.
- Exiting autonomous mobile robotics may reduce diversification and requires focus on core growth segments for Zebra.
- Implementation and adoption of AI-powered applications at Zebra depend on successful pilot outcomes and market acceptance.
- Both stocks may experience further price volatility as markets adjust to company-specific and macroeconomic developments.