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Lululemon's price has recently declined, even as its revenue inches higher.
MercadoLibre is positioning itself to join the trillion-dollar club in 15 years.
Artificial intelligence may be all the rage in today's bull market, but plenty of growth stocks can be found outside of tech. Indeed, one sector that looks poised for a rebound is consumer goods. After a beatdown resulting from tariff news earlier this year, many of these companies are trading at reasonable valuations, even as their fundamentals and brand power hold up.
With that in mind, let's look at two consumer goods stocks that might be worth a $1,000 investment today.
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Lululemon Athletica (NASDAQ: LULU) has spent two decades building one of the strongest brands in athletic wear. Because of its prestige, customers are still willing to pay triple-digit prices for leggings, as well as line up for limited product drops. Direct-to-consumer sales, which make up about half its revenue mix, continue to carry rich margins and keep brand control in-house.
But it's not all smooth sailing for the athleisure icon. Indeed, one might even say easy growth is behind it. Management expects net revenue to be in the range of $11.1 billion to $11.3 billion for 2025, representing 5% to 7% growth. That's a far cry from the pandemic days when double-digit growth seemed to be the norm. Its North America segment is stagnant, and same-store sales aren't delivering fireworks like they used to. International is growing fast, especially in China, but it's not big enough to move the whole needle.
LULU Revenue (Annual) data by YCharts
This slowdown in revenue growth has done more than just take a little air out of Lululemon's stock. It's let out over half the balloon. Shares are down to about $205 (at time of writing) from $390 to $410 earlier this year, even though annual revenue is still inching higher. Analysts expect annual revenue to reach $12.74 billion two years from now, a respectable gain, even if that's not the hypergrowth that Lululemon investors were used to in the past.
Image source: Getty Images.
Still, even as revenue growth slows, there's a bull case to be made for sticking with Lululemon for the long term. The stock's forward price-to-earnings ratio, currently around 13.4, is a major discount to its historical average. That gap alone suggests that the market has priced in slowing growth, which leaves room for expansion if margins hold steady and earnings keep climbing.
A loyal customer base gives Lululemon pricing power that few apparel brands can match, and underpenetrated markets (like menswear and overseas) remain long-term levers the company can pull. It might take some time, but growth in those lanes could push earnings higher and sentiment back toward a premium valuation if management can execute well.
MercadoLibre (NASDAQ: MELI) is what you'd get if Amazon and PayPal merged, then set up shop in Latin America. Indeed, it's the dominant marketplace in a region where e-commerce and digital banking still have years -- maybe even decades -- of growth ahead.
The bull argument for MercadoLibre goes something like this. E-commerce penetration across the company's key markets -- such as Brazil and Mexico -- still trails developed economies, to say nothing of its expected expansion into smaller, still-unpenetrated Latin American countries (like Ecuador and Peru). Meanwhile, millions in Latin America lack bank accounts or credit access, and cash remains common. As more households shift from cash to digital money, its financial arm -- Mercado Pago -- could easily become an "on-ramp," turning first-time users into repeat payers, and repeat payers into credit customers.
Currently, MercadoLibre dominates the Latin American market. According to data collected by eMarketer, it moves more merchandise than its next 15 competitors put together. And yet -- and this is a big one -- over two-thirds of online spending in Latin America is still up for grabs. That's a big opportunity for MercadoLibre, which will have the infrastructure and brand power to capture a huge chunk of it.
Of course, we can't overlook potential headwinds. Currency and policy changes can make individual quarters lumpy, while tariffs and civil unrest in key markets could also cause hiccups and down periods. What matters for the long haul, however, is whether active buyers, total payment volume, and ad revenue can keep outgrowing costs, while take rates (the percentage or revenue that MercadoLibre keeps from each transaction) and margins hold steady.
If those dots connect -- and by the looks of it, they should -- MercadoLibre could be positioned to join Amazon in the trillion-dollar club in the next 15 years.
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Steven Porrello has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Lululemon Athletica Inc., MercadoLibre, and PayPal. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short September 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.
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