Lululemon (LULU): Examining Valuation After Earnings Miss and Guidance Cut on Tariff Concerns

If you are wondering what to do with lululemon athletica (LULU) after the recent earnings announcement and guidance update, you are not alone. The latest quarterly results showed steady sales growth, but earnings dipped compared to last year and the company lowered its outlook for 2025, citing ongoing tariff headwinds. This combination of incremental revenue gains and margin pressure sparked a wave of analyst downgrades and a slide in the share price, pushing LULU down to a new yearly low. For investors, the key question now is whether the reset in expectations changes the long-term story or simply resets the baseline for potential upside.

Year-to-date, Lululemon’s stock has plunged nearly 56%, with recent momentum still to the downside. The string of downgrades reflects skepticism about the company’s US business and margin outlook, even as management highlights global expansion efforts and continued investment in digital. Buybacks have continued, but concerns over higher input costs and reduced guidance have kept the pressure on. Despite these headwinds, the company’s multi-year growth prospects remain a point of debate as the market digests shifting trends in both earnings and consumer demand.

With the stock down sharply in 2025, the question remains whether the worst is already behind or if investors are right to stay cautious as markets weigh whether future growth is fully priced in.

Most Popular Narrative: 28.1% Undervalued

The latest narrative suggests lululemon athletica is trading well below its estimated fair value, offering significant upside based on current analysis and future projections. According to this perspective, the market may be discounting Lululemon's long-term strengths and growth plans, which creates an opportunity for investors monitoring a possible rebound.

Lululemon has shown resilience. Its strong market position in the premium athleisure segment and its ability to adapt to changing consumer preferences have helped it navigate challenges effectively. Overall, Lululemon’s strong financial performance, innovative product offerings, expansion efforts, and commitment to sustainability provide a compelling bullish case for the stock.

Curious about what fuels this bullish stance? This outlook is built on projections that challenge the recent market gloom and highlight factors insiders and analysts are betting on for future gains. Want to uncover which bold calculations and growth expectations underpin this undervalued thesis? The full narrative breaks down the exact drivers behind this surprising valuation gap and what could come next.

Result: Fair Value of $225.76 (UNDERVALUED)

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

However, persistent margin pressure or a slowdown in global demand could challenge the bullish thesis and limit the stock's recovery potential.

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

Another View: Discounted Cash Flow Perspective

Our SWS DCF model provides another angle and highlights a significant difference between the stock's market price and its calculated fair value. Does this more detailed cash flow approach reveal hidden opportunity, or is it simply another estimate to debate?

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 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own lululemon athletica Narrative

If you want to look deeper or think there's more to the numbers, you can easily build your own take using our data tools in just a few minutes, and Do it your way.

A great starting point for your lululemon athletica research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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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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