Lululemon Athletica Stock Downgrade

Investing.com — CFRA Research analysts have downgraded Lululemon Athletica (NASDAQ:LULU) from Strong Buy to Hold and reduced the price target from $400 to $280.

According to the firm’s note, this adjustment is based on a 20.0x multiple of the firm's fiscal year 2025 (ending in January) earnings per share (EPS) estimate, which is below Lululemon's one-year average forward price-to-earnings (P/E) multiple of 26.9x.

The downgrade highlights CFRA's concerns regarding inventory issues that Lululemon is facing as it approaches the holiday season, potentially impacting sales in the third and fourth quarters.

> “After a nearly 20% pop from its post-Q2 earning low, we now believe shares are due for consolidation,” analysts stated.

Despite this downgrade, they maintain a positive long-term outlook for Lululemon, citing strong brand resonance across various age groups.

CFRA acknowledges the company's growth potential in international markets, particularly in Mainland China, but warns about challenges in delivering the right products to market in the near term.

> “We think shares will consolidate as we move through the holiday season. We would also like to see a few quarters of improvement to core product inventory,” analysts noted.

Lululemon has lowered its full-year forecast and reported its first revenue miss in over two years in late August, following a misalignment with a highly anticipated product launch and slowing growth in the Americas. The company now projects annual net revenue to be between $10.38 billion and $10.48 billion, down from an earlier range of $10.7 billion to $10.8 billion.

Lululemon also revised its expected EPS to between $13.95 and $14.15, down from the previous estimate of $14.27 to $14.47.