Lululemon stock has grossly underperformed the broader markets in the last five years. While the S&P 500 index trades near record levels, LULU stock is down almost 80% from all-time highs.
Notably, the stock tanked 17% after its fiscal Q2 2027 (ended in July) results, as a lackluster report forced several analysts to lower price targets.
JPMorgan analyst Matthew Boss slashed his price target on the athletic apparel maker by 38% to $95 from $154, a $59 drop. However, Boss maintained his “Neutral” rating on LULU stock.
The price cut came right after Lululemon (LULU) posted second-quarter results that missed expectations.
Revenue fell short of consensus, and international sales weakened more than what analysts expected.
Boss told investors the company’s third-quarter earnings outlook sits about 60% below Wall Street consensus, according to the Fly. That’s a steep gap, which helps explain why the firm moved so aggressively on its target.
Why Lululemon stock is down in 2026
Lululemon has built its brand on premium leggings, yoga wear, and a loyal community of shoppers.
For years, that formula delivered strong growth in North America and even faster growth in China.
That momentum has stalled.
In the second quarter, total net revenue fell 4% to $2.4 billion, and comparable sales fell 10%. North America, still the company’s biggest market, saw comparable sales sink 12%.
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China mainland, once a key growth driver, is wrestling with slowing sales. Revenue in the region rose 4% and declined 2% when adjusted for currency. Comparable sales in China dropped 8% year over year.
Management pointed to a mix of problems, as negative online commentary hurt brand sentiment in China. A softer Tmall shopping event also added pressure.
In North America, traffic slowed, and some new product launches simply did not connect with shoppers.
JPMorgan’s Lululemon stock price target explained
Boss based his new $95 price target on a company still working through real challenges.
A few numbers stand out from the earnings report that likely shaped his view:
- Full-year revenue guidance now sits at $10.35 billion to $10.5 billion, down 5-7% from last year.
- Full-year earnings per share guidance dropped to $9.48 to $9.73, well below last year’s $13.26.
- Third-quarter revenue is expected to be between $2.29 billion and $2.32 billion, a decline of 10-11%.
- Third-quarter earnings per share guidance came in at just $0.93 to $0.98, compared to $2.59 a year ago
- Operating margin for the third quarter is expected to be near 6.5%, down sharply from 17% last year
Lululemon’s profit margins are expected to decline rapidly over the next 12 months. As revenue is forecast to fall, marketing costs and store investments will remain elevated, driving the bottom line lower.
Lululemon is spending more on brand campaigns and product development while revenue moves in the opposite direction.
Lululemon’s plan to turn things around
To be fair, Lululemon is focused on a strategic turnaround.
The company is chasing its better-performing styles, cutting SKUs to declutter stores, and leaning harder into marketing in the back half of the year.
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Chief Financial Officer and interim co-Chief Executive Meghan Frank addressed the traffic problem during the company’s earnings call, stating:
“We’re seeing the pressure in traffic. We’re also seeing negative year over year conversion, but we’re not seeing that worsen.”
Frank added that the company is investing in marketing tied to major events like the U.S. Open and the fall marathon season in New York, Chicago, and Toronto, hoping to rebuild brand excitement.
Lululemon is also bringing in new leadership. Heidi O’Neill joins as chief executive, and management said she will take a fresh look at strategy once she settles in.
Is LULU stock undervalued right now?
A price target cut of this size sends a clear signal. JPMorgan believes Lululemon’s recovery will take longer than many hoped, and the stock’s valuation needs to reflect that reality.
Boss kept his Neutral rating rather than downgrading further, which suggests he sees the stock as fairly priced at current levels rather than a stock to avoid entirely. Still, a $59 cut to a price target is a significant move by Wall Street standards.
Related: Lululemon makes big cuts to one kind of store
Given consensus estimates compiled by TIKR, Lululemon is forecast to report a free cash flow of $699 million in fiscal 2028, down from $1.64 billion in fiscal 2024. However, free cash flow is projected to improve to $2.94 billion in fiscal 2031.
LULU stock can almost triple from current levels within the next four years if it trades at 10x forward FCF. However, it needs to flawlessly execute its near-term plans and consistently beat Wall Street estimates.
For everyday investors, the lesson here is simple.
Even well-known brands with loyal customers can struggle when a product misses the mark, and international markets hit unexpected headwinds.
Lululemon still has a strong balance sheet and a global footprint, but the next few quarters will show whether its turnaround plan can actually restore growth.