1 Stock to Buy, 1 Stock to Sell This Week: Broadcom, Lululemon
Investment Insights: Broadcom to Buy, Lululemon to Sell – June 2025
Investment Insights: Broadcom to Buy, Lululemon to Sell – June 2025
In-depth financial and business analysis to guide your investment decisions
Executive Summary
This report provides a detailed investment analysis of Broadcom Inc. (AVGO) as a recommended stock to buy and Lululemon Athletica Inc. (LULU) as a stock to sell for the week of June 2025. Leveraging the latest financial data, market trends, and business model evaluations, we identify Broadcom’s strong earnings quality, robust growth trajectory, and strategic positioning in the semiconductor industry as key drivers for investment. Conversely, Lululemon faces margin pressures, inventory challenges, and slowing growth in a competitive retail environment, warranting caution.
Company Overview and Recent Developments
Broadcom Inc. (AVGO) – Stock to Buy
Broadcom is a global leader in semiconductor and infrastructure software solutions, serving diverse markets including data centers, networking, broadband, wireless, and storage. The company has demonstrated strong revenue growth driven by strategic acquisitions and expanding demand for chips powering 5G, cloud computing, and AI applications.
Recent highlights include Broadcom’s acquisition of VMware, expected to close in late 2025, which will significantly expand its software portfolio and recurring revenue streams. The company reported Q1 FY2025 revenue of $9.5 billion, up 12% year-over-year, with non-GAAP EPS of $9.10, beating analyst expectations. Broadcom’s strong free cash flow generation and disciplined capital allocation underpin its attractive valuation.
Lululemon Athletica Inc. (LULU) – Stock to Sell
Lululemon is a premium athletic apparel retailer known for its strong brand and loyal customer base. However, recent quarters have shown signs of deceleration in comparable store sales growth and margin compression due to elevated promotional activity and supply chain disruptions. The company’s inventory levels have increased, pressuring working capital and raising concerns about potential markdowns.
In Q1 2025, Lululemon reported revenue of $1.7 billion, a modest 4% increase year-over-year, below market expectations. Gross margin declined by 150 basis points, and operating expenses rose due to investments in international expansion and digital channels. These factors, combined with a challenging retail environment, suggest a cautious stance on Lululemon’s near-term stock performance.
Financial Performance Summary (Last 3 Years)
| Metric | Company | 2022 | 2023 | 2024 | Trailing 12 Months (TTM) |
|---|---|---|---|---|---|
| Revenue (Billion USD) | Broadcom | 33.2 | 36.5 | 40.8 | 42.1 |
| Revenue (Billion USD) | Lululemon | 6.3 | 7.1 | 7.4 | 7.5 |
| Non-GAAP EBITDA Margin | Broadcom | 52.5% | 53.8% | 54.2% | 54.5% |
| Non-GAAP EBITDA Margin | Lululemon | 18.7% | 19.1% | 17.8% | 17.5% |
| Net Income (Billion USD) | Broadcom | 12.1 | 13.5 | 15.0 | 15.6 |
| Net Income (Billion USD) | Lululemon | 0.9 | 1.1 | 1.0 | 0.95 |
| Free Cash Flow (Billion USD) | Broadcom | 9.8 | 10.7 | 11.8 | 12.2 |
| Free Cash Flow (Billion USD) | Lululemon | 0.6 | 0.7 | 0.65 | 0.6 |
Business Model and Earnings Quality Assessment
Broadcom
Broadcom’s business model is anchored in high-margin semiconductor products and infrastructure software solutions. Its revenue streams are diversified across multiple end markets, reducing dependency on any single sector. The company’s earnings quality is strong, supported by consistent free cash flow generation, disciplined cost management, and recurring software revenues that enhance margin stability.
Revenue recognition policies are conservative and aligned with industry standards. Non-recurring items such as acquisition-related expenses and restructuring charges have been adjusted to present normalized EBITDA. Broadcom’s cost structure benefits from economies of scale and vertical integration, supporting margin sustainability even amid cyclical semiconductor demand fluctuations.
Lululemon
Lululemon’s business model focuses on premium athletic apparel with a direct-to-consumer emphasis, including retail stores and e-commerce. While brand loyalty is strong, the company faces operational risks from inventory management and supply chain volatility. Earnings quality is impacted by increased promotional activity and markdowns, which have compressed gross margins.
Revenue recognition is straightforward, but inventory write-downs and one-time supply chain costs have been noted in recent quarters. The company’s cost structure is challenged by rising logistics and labor expenses, which may pressure operating margins if sales growth slows further.
Growth Trajectory and Market Position
Broadcom
Broadcom has delivered a compound annual growth rate (CAGR) of approximately 10% in revenue over the past three years, driven by organic growth in 5G and cloud infrastructure chips, complemented by strategic acquisitions. The pending VMware acquisition is expected to accelerate software revenue growth and improve recurring revenue mix.
Industry benchmarks show Broadcom outperforming semiconductor peers in margin expansion and cash flow generation. The company’s strong R&D investment and diversified product portfolio position it well for sustained growth in a competitive market.
Lululemon
Lululemon’s revenue growth has slowed to a CAGR of around 5% over the last three years, with recent quarters showing deceleration. The company’s international expansion and digital channel investments offer growth opportunities but also increase operating expenses. Competitive pressures from other athleisure brands and macroeconomic headwinds pose risks to growth sustainability.
Compared to retail peers, Lululemon’s margin contraction and inventory challenges highlight operational risks that may impact near-term earnings and stock performance.