Leggings Are Losing Their Luster. Should You Buy Lululemon Stock on the Dip or Stay Far, Far Away?
Lululemon (LULU) stock is down nearly 20% on Friday after the athleisure specialist reported a better-than-expected Q2 but issued disappointing guidance for the full year.
According to the company’s CEO Calvin McDonald, “we have missed opportunities to create new trends” and that’s resulting in product headwinds in the U.S. market.
Lululemon stock has been a big disappointment for investors in 2025. Following the post-earnings plunge, the athletic apparel retailer is trading about 60% below its year-to-date high set in January.
Evercore ISI’s senior research analyst Michael Binetti downgraded LULU shares this morning to “in line” and slashed his price target to $180, no longer indicating meaningful upside from here.
In his research note, Binetti cited several headwinds, including continued deceleration in the U.S. and “Canada trending below the FY25 guidance” for his dovish view on Lululemon Athletica.
Added competition from the likes of Alo and Vuori, he added, could also make it increasingly difficult for Lululemon stock to sustainably recover in the second half of 2025.
Investors are recommended to trend with caution in Lululemon shares also because the company’s gross margin outlook has worsened significantly.
Plus, LULU stock isn’t really attractively valued at the time of writing either. Its forward price-earnings (P/E) multiple of nearly 14x is difficult to justify, especially given the reduced guidance.
The recent removal of the “de minimis” exemption and higher tariffs under President Donald Trump are among other meaningful headwinds facing Lululemon Athletica in 2025.
In the earnings release, the company itself said new levies were likely to trim its profits by as much as $240 million this year.
Other Wall Street firms that lowered their estimates on Lululemon stock following its Q2 earnings today include Bernstein and Stifel.
That said, the mean target on LULU shares remains at about $276, according to Barchart, signaling potential upside of more than 60% from here.
