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Investing.com - Wells Fargo lowered its price target on Lululemon Athletica Inc. (NASDAQ:LULU) to $160 from $205 while maintaining an Equal Weight rating following disappointing second-quarter earnings results. The stock, currently trading at $206.09, has declined over 41% in the past six months, with 12 analysts recently revising earnings estimates downward according to InvestingPro data.
The athletic apparel retailer’s performance was described as a "much worse than feared print" by Wells Fargo, which highlighted it as a "clear negative standout" during an earnings season that has otherwise seen many companies reporting upside surprises. Despite these challenges, the company maintains strong fundamentals with a healthy 59.1% gross profit margin and a solid current ratio of 2.27.
Wells Fargo noted multiple pressure points affecting Lululemon, including continued and worsening U.S. weakness, emerging problems in the Chinese market, accelerating markdown and inventory issues, and tariff headwinds that proved "much worse than expected."
The firm characterized Lululemon’s fiscal year guidance reduction as the company’s "worst guide down in at least 10+ years," suggesting prolonged markdown risk and tariff pressure will continue to impact performance.
Wells Fargo’s new price target of $160 represents a valuation of 13 times the company’s projected fiscal year 2026 earnings per share, with the firm noting that revenue inflection isn’t expected until Spring 2026. Based on comprehensive InvestingPro analysis, the stock appears undervalued at current levels, with analyst targets ranging from $100 to $500.
In other recent news, Lululemon Athletica Inc. has faced several analyst downgrades following its second-quarter earnings report. The company reported a sales miss and a moderated earnings outlook, prompting Telsey Advisory Group to downgrade its rating from Outperform to Market Perform, with a significant price target reduction from $360.00 to $200.00. BTIG also lowered its price target to $303.00, maintaining a Buy rating, citing weakness in U.S. sales and ineffective product enhancements. UBS reduced its price target to $185.00, maintaining a Neutral rating due to disappointing second-quarter results and a need for operational revamping. Evercore ISI downgraded Lululemon from Outperform to In Line, with a new price target of $180.00, pointing to flat sales in the U.S. and slowed growth in Canada. Additionally, Goldman Sachs adjusted its price target to $200.00 while maintaining a Neutral rating, following Lululemon’s revision of its FY25 outlook amid softening consumer demand. These developments highlight the challenges Lululemon faces in maintaining its growth trajectory in key markets.
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