Renewed Market Caution Will Drive Momentum Shifts Amid Competitive Pressure

Lululemon athletica's fair value estimate declined slightly to $194.36 from $195.84. Analysts cite slowing growth trends, ongoing U.S. market headwinds, and greater earnings uncertainty across recent Street research.

Analyst Commentary

Recent Street research reveals a notable shift in sentiment surrounding Lululemon athletica, with a marked increase in caution and a growing preference to wait on the sidelines until clearer signs of recovery or renewed growth emerge. While the consensus outlook has turned more negative, a mix of bullish and bearish takeaways can be gleaned from the variety of analyst assessments.

Bullish Takeaways

• Some bullish analysts highlight Lululemon's strong brand equity, calling the recent share price selloff and lower valuation a potential opportunity for long-term investors if the company can deliver on its sales growth targets.
• Despite headwinds, select firm model updates are raising near-term EPS forecasts due to better-than-expected tariff mitigation and continued efforts to streamline operations.
• The company is viewed as having compelling valuation multiples compared to industry peers, which could become attractive if operational performance stabilizes and earnings risks diminish in coming quarters.

Bearish Takeaways

• Bearish analysts emphasize deteriorating U.S. sales trends, with recent quarters showing negative year-over-year growth for the first time in several years, and lower fiscal 2025 and 2026 guidance for both sales and earnings.
• Multiple firms cite rising competitive pressures and a “stale” product assortment as key risks, reinforcing concerns about Lululemon’s ability to reaccelerate growth in its core market.
• Ongoing macroeconomic headwinds and tariff challenges, especially the removal of the de minimis exemption, as well as continued uncertainty around execution, raise the likelihood of further downward revisions to earnings estimates.
• Many analysts are reluctant to recommend the stock near-term, seeking more evidence that strategic initiatives, such as new product launches, can succeed amid increased uncertainty and margin pressures.

What's in the News

• Citi lowered its price target on Lululemon to $220 from $270, maintaining a Neutral rating. The firm expects a small Q2 earnings beat, but anticipates a guidance cut due to higher tariffs (Citi).
• The company revised its full-year 2025 guidance and now projects net revenue between $10.85 billion and $11.00 billion, with 2% to 4% growth. Diluted EPS is expected to be between $12.77 and $12.97, reflecting anticipated tariff impacts and mitigation efforts.
• Lululemon repurchased 1.53 million shares between May and August 2025, bringing total buybacks to over 7.55 million shares for $2.2 billion under its announced program.
• The company entered a new unsecured five-year revolving credit facility with $600 million in commitments. This facility is expandable up to $1 billion and matures in October 2030.

Valuation Changes

• The Fair Value Estimate has declined slightly to $194.36 from $195.84 per share.
• The Discount Rate edged down marginally to 8.12% from 8.14% previously.
• The Revenue Growth forecast ticked lower to 5.06% from 5.13% prior.
• The Net Profit Margin estimate fell to 14.18% from the previous 14.64% level.
• The Future P/E ratio is projected to rise modestly to 14.94x from 14.56x.