```htmlStock Analysis Report: Broadcom (Buy) & Lululemon (Sell) - June 2025

Stock Analysis Report: Broadcom Inc. (Buy) & Lululemon Athletica Inc. (Sell)

Comprehensive Quality of Earnings, Business Model, and Growth Trajectory Analysis — June 2025

Executive Summary

This report provides a detailed financial and operational analysis of Broadcom Inc. (NASDAQ: AVGO) as a recommended stock to buy, and Lululemon Athletica Inc. (NASDAQ: LULU) as a stock to consider selling this week. The analysis is based on the latest publicly available financial data, recent market developments, and quality of earnings (QoE) considerations.

Broadcom demonstrates strong normalized EBITDA growth, robust cash flow generation, and a scalable business model driven by semiconductor and infrastructure software demand. Meanwhile, Lululemon faces margin pressure, inventory challenges, and decelerating growth amid macroeconomic headwinds and increased competition in the athleisure market.

The report includes detailed financial tables, margin and revenue trend charts, and a balanced assessment of earnings quality and growth sustainability for both companies.

Broadcom Inc. (AVGO) — Stock to Buy

Company Overview & Business Model

Broadcom Inc. is a global technology leader specializing in semiconductor solutions and infrastructure software. Its core revenue streams include semiconductor products for data centers, networking, broadband, wireless communications, and storage, alongside enterprise software solutions acquired through strategic M&A.

The company’s business model benefits from high barriers to entry, diversified end markets, and recurring software revenue, which enhances earnings stability. Broadcom’s cost structure is optimized through scale and vertical integration, supporting strong gross margins above 55%.

Financial Performance & Quality of Earnings

Broadcom’s latest financials (FY 2022-2024) show consistent revenue growth driven by strong demand in cloud infrastructure and 5G deployments. Adjusted EBITDA margins remain robust, supported by disciplined cost management and synergies from acquisitions.

Quality of earnings analysis indicates minimal one-time adjustments, with normalized EBITDA reflecting sustainable operational performance. Revenue recognition policies comply with ASC 606 standards, and working capital trends are stable, indicating healthy cash conversion cycles.

Growth Trajectory & Market Position

Broadcom’s growth is a mix of organic expansion in semiconductor demand and inorganic growth through strategic acquisitions (e.g., VMware integration). The company is well-positioned to capitalize on secular trends such as AI, 5G, and cloud computing.

Industry benchmarking shows Broadcom outperforming peers in margin sustainability and free cash flow generation, supporting a strong investment thesis.

Key Financial Data (FY 2022-2024)

Lululemon Athletica Inc. (LULU) — Stock to Sell

Company Overview & Business Model

Lululemon is a premium athletic apparel company known for its high-quality athleisure wear. Its revenue streams are primarily from direct-to-consumer sales and wholesale channels. The company’s brand strength and community engagement have driven rapid growth historically.

However, Lululemon’s cost structure is challenged by rising raw material costs, supply chain disruptions, and increased promotional activity, which have pressured gross margins. The business model’s scalability is tested by intensifying competition and changing consumer preferences.

Financial Performance & Quality of Earnings

Recent financial results show decelerating revenue growth and margin compression. Inventory levels have increased, raising concerns about potential markdowns and earnings quality. Non-recurring costs related to supply chain adjustments and store rationalization have impacted reported earnings.

Revenue recognition remains consistent with GAAP, but working capital trends suggest inventory buildup that could affect future cash flows. Adjusted EBITDA margins have declined from prior years, signaling operational challenges.

Growth Trajectory & Market Position

Lululemon’s growth has been primarily organic, with some inorganic expansion through acquisitions (e.g., Mirror). However, macroeconomic headwinds and competitive pressures in the athleisure market are slowing growth momentum.

Compared to peers, Lululemon’s margin contraction and inventory risks warrant caution, suggesting a potential sell or hold position until operational improvements are evident.

Key Financial Data (FY 2022-2024)

Conclusion & Investment Recommendations

Broadcom stands out as a high-quality earnings company with a resilient business model, strong cash flow, and attractive growth prospects