Lululemon Athletica Inc. (LULU): Is This a Buying Opportunity?

The Gap Inc. (NYSE:GPS) is also making inroads. In 2008, the company acquired e-tailer Athleta for $150 million. Since then, The Gap Inc. (NYSE:GPS) has opened 35 Athleta locations with plans to open 65 new stores over the next two years. According to analysts, Athleta could triple its current revenue, grossing $500 million by the end of 2014.

Could these big rivals out-muscle Lululemon Athletica inc. (NASDAQ:LULU)?

Historically, cheaper alternatives have done little to faze the company’s core customer. Back in 2009, Target Corporation (NYSE:TGT) and Victoria’s Secret entered yoga apparel at significantly lower price points. The bears cried “margin compression!” but the competition had no noticeable impact on Lululemon’s financial results.

Foolish bottom line

The real benefit of Lululemon Athletica inc. (NASDAQ:LULU)’s PR problems: the stock’s valuation is back in-line with industry peers. Lululemon now trades at a 28 forward earnings multiple. With earnings projected to grow 25% next year, the stock sports at a reasonable 1.1 PEG ratio.

Investors shouldn’t let the pun filled headlines scare themselves out of an otherwise great growth story.

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