Lululemon (LULU): Wall Street Keeps Cutting Targets, But Nobody’s Calling It Cheap Enough to Buy

Lululemon (LULU): Wall Street Keeps Cutting Targets, But Nobody’s Calling It Cheap Enough to Buy

Faheem Tahir

Mon, September 21, 2026 at 12:52 AM GMT+3 4 min read

• LULU -1.34%

On September 3, 2026, lululemon athletica inc. (NASDAQ:LULU) reported second-quarter fiscal 2026 results for the period ended August 2, 2026. Net revenue fell 4% to $2.4 billion, missing the $2.46 billion analysts expected, and comparable sales dropped 10% on a constant dollar basis. Management cut full-year revenue guidance to a decline of 5% to 7%, down from a prior forecast of flat to down 1%, and lowered full-year earnings per share guidance to $9.48 to $9.73 from its prior forecast of $10.95 to $11.15, compared with $13.26 earned in fiscal 2025. Shares fell about 18% in extended trading. Incoming CEO Heidi O'Neill was set to start the following week.

Photo by Ian Deng Quddu on Unsplash

Bulls: A Cheaper Stock, Early Product Green Shoots, and a Strong Balance Sheet Buy Time

Citi's cut to $117 from $130 came with a Neutral rating and the observation that the stock's risk-reward is "slightly more favorable" after the selloff, even though the firm called fiscal 2027 visibility "very unclear." The operational bright spots are real.

lululemon athletica inc. (NASDAQ:LULU) increased its chase volume, the supply chain capability that lets it reorder fast-moving styles quickly, by about 20% this year, and away-from-body styles including the Groove Wide-Leg, Align Foldover Jogger, Breezily, and an updated Dance Studio Pant are trending well as shoppers shift from tight-fitting leggings. The brand's community pull held up too.

The SeaWheeze Half Marathon and Festival returned in August for the first time since 2019, drawing nearly 10,000 runners from 24 countries and roughly 14,000 festival attendees, while more than 85,000 people from 120 countries joined the companion Strava challenge, strong enough that Lululemon already committed to bringing the event back next summer. Rest of World revenue, spanning EMEA and APAC, grew 5% on a reported basis, and the company ended the quarter with $1.4 billion in cash and no outstanding borrowings.

Bears: A Guidance Cut Analysts Widely Called Jarring, with No Clear Bottom in Sight

Wells Fargo cut its target to $95 from $105, keeping an Equal Weight rating, saying the magnitude of the decline "feels jarring" with a 30% reduction to second-half earnings estimates.

Morgan Stanley's Alex Straton lowered her target to $83, keeping an Underweight rating, arguing the guidance cut "lowered the bar meaningfully, but we don't think the reset is done," and expects new management to pursue a "shrink to grow" strategy that drives further negative estimate revisions.

BMO Capital began coverage with an Underperform rating and a $70 price target, citing weakening demand in both the Americas and China and warning that the company's historically strong margins are coming under pressure.

JPMorgan's Matthew Boss cut his target on lululemon athletica inc. (NASDAQ:LULU) to $95 from $154, flagging that the company's third-quarter earnings outlook sits 60% below consensus. Truist's Joseph Civello kept a Sell rating and cut his target to $82, saying the headwinds will prove more structural.

The underlying numbers explain the alarm. North America revenue fell 8%, leggings sales dropped approximately 20%, and China revenue grew 4% on a reported basis but fell 2% in constant currency after a wave of negative social media commentary tied to a marketing event at the Great Wall of China. Lululemon's athleisure market share fell 10 percentage points to 43.9% in August, according to M Science data, while Alo and Vuori gained 5.9 and 2.2 percentage points respectively.

What The Smart Money Sees

Citadel Investment Group raised its stake 84% to 1.07 million shares worth $122.7 million as of the second quarter of 2026, while AQR Capital Management cut its position 40% to 901,601 shares worth $101.5 million. Gotham Asset Management increased its stake 58% to 519,894 shares worth $59.4 million, and Renaissance Technologies took a new position of 377,844 shares worth $43.1 million.

Overall hedge fund ownership fell to 51 funds from 61 the prior quarter. Short interest sits at 12.78% of float, and shares trade at just 9.94 times forward earnings as of September 18, 2026, a multiple that shows the target cuts have already priced in much of the bad news even as no analyst has moved to an outright bullish rating.

Most analysts reacting to the print cut targets or estimates, while BMO opened coverage with an Underperform rating. The debate is not whether lululemon athletica inc. (NASDAQ:LULU) survives; the balance sheet and brand pull at events like SeaWheeze argue it does. It is whether new CEO Heidi O'Neill can turn early strength in away-from-body styles into sales growth before the multiyear reset several analysts are now underwriting plays out in full.

While we acknowledge the potential of LULU as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on thebest short-term AI stock.READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 YearsDisclosure: None. Follow Insider Monkey on Google News.