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Investing.com - Evercore ISI downgraded Lululemon Athletica Inc. (NASDAQ:LULU) from Outperform to In Line and slashed its price target to $180.00 from $265.00, citing deteriorating key performance indicators. According to InvestingPro data, LULU shares have declined over 41% in the past six months, though analysis suggests the stock may be undervalued at current levels.
The downgrade follows Lululemon’s second-quarter update, which revealed flat year-over-year sales in the U.S. market, compared to 2% growth in the first quarter. Canada’s growth also decelerated, showing an 8 percentage point sequential decline in the second quarter excluding certain items. Despite these challenges, InvestingPro data shows the company maintains impressive gross margins of 59.1% and operates with a moderate debt level.
Evercore ISI lowered its earnings per share estimates for Lululemon to $12.80 for 2025 (down from $14.50) and $12.25 for 2026 (down from $15.85), reflecting concerns about the company’s growth trajectory. This aligns with InvestingPro data showing 12 analysts have recently revised their earnings estimates downward, though the stock trades at an attractive P/E ratio of 13.9x relative to its near-term earnings growth potential.
The firm specifically highlighted the removal of the de minimis exemption as a "far, far bigger issue" for Lululemon than previously anticipated. Additionally, Lululemon reduced its fiscal year 2025 sales outlook for China from 25-30% growth to 20-25%.
Evercore ISI also noted that Lululemon’s push into new products to revitalize sales "is not resonating with the consumer," suggesting the company’s innovation efforts are deteriorating.
In other recent news, Lululemon Athletica Inc. reported its financial results for the second quarter of fiscal year 2025, with an earnings per share of $3.10, which exceeded analyst forecasts of $2.87. However, the company’s revenue of $2.53 billion slightly missed expectations of $2.54 billion. In light of these results, several firms have adjusted their outlook on the company. Goldman Sachs lowered its price target for Lululemon to $200 from $232, maintaining a Neutral rating due to the company’s revised fiscal year 2025 outlook across key markets like the US, Canada, and China. William Blair downgraded Lululemon from Outperform to Market Perform, expressing concerns over U.S. sales recovery and tariff impacts. Stifel also downgraded the company from Buy to Hold, reducing its price target to $205 from $324, citing domestic market pressures and the removal of the de minimis exemption. These developments reflect the challenges Lululemon is facing in its various markets.
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