Lululemon Athletica (LULU) Could Be 21% Undervalued After Cutting 2026 Guidance

Lululemon Athletica (LULU) cut its fiscal 2026 revenue and earnings guidance after projecting lower Q2 earnings per share and warning of a significant gross margin drop tied to higher tariffs and investments.

See our latest analysis for lululemon athletica.

Since cutting guidance, lululemon athletica’s 7 day share price return of 4.99% and 30 day gain of 4.15% have come after a sharp year to date decline of 43.54%, while the 5 year total shareholder return is down 71.00%, pointing to fading long term momentum despite a recent short term bounce.

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After the guidance cut and a sharp reset in lululemon athletica’s share price, the gap between today’s US$119.03 level, the analyst targets and intrinsic value estimates is wide. Where does fair value sit now?

Most Popular Narrative: 20.6% Undervalued

The most followed narrative on lululemon athletica sees a fair value of $150 against the last close of $119.03, which frames the current discount as material rather than marginal.

This is what makes a high-quality business cheap. You do not get a 24% ROIC compounder for ten times earnings when everything is running smoothly. You get it when several unrelated bad things happen simultaneously, and the algorithms stop trying to distinguish a temporary mess from a permanent one.

Read the complete narrative.

This fair value hinges on how long margins stay pressured, how the Americas reset plays out, and what kind of profit profile lululemon athletica can sustain once the dust settles. The key assumptions sit inside a tight range. Yet they still leave room for very different outcomes on earnings power and what multiple the stock might one day trade on again. The narrative lays out that math in plain terms without assuming a blue sky scenario.

Result: Fair Value of $150 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, lululemon athletica’s narrative could be challenged if weakness in the Americas deepens or if tariffs and margin pressure persist longer than current expectations suggest.

Find out about the key risks to this lululemon athletica narrative.

Another View: SWS DCF model Points Lower For lululemon athletica

The user narrative points to a fair value of $150 for lululemon athletica, which frames the stock as undervalued. Our DCF model tells a very different story. It suggests a value of $74.25 per share, which would make the current $119.03 price look overvalued instead.

That kind of gap between a user narrative and the SWS DCF model raises a direct question: Which set of assumptions about future cash flows do you trust more, and how much downside are you comfortable underwriting if the lower figure proves closer to reality?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out lululemon athletica for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 49 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Given the different signals around lululemon athletica, it makes sense to check the underlying data yourself and decide where you stand. If you want to see why some investors still see positives in the story, take a closer look at the 2 key rewards.

Looking for more investment ideas beyond lululemon athletica?

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• Hunt for quality at a reasonable price by checking out 49 high quality undervalued stocks that may offer stronger fundamentals than the headline stories.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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