Key Stats for Lululemon Stock
- Post-Earnings Performance: -18%
- 52-Week Range: $98 to $226
- Valuation Model Target Price: around $128
- Implied Upside: around 27%
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What Happened?
Lululemon Athletica stock fell about 18% after earnings to roughly $100 per share after fiscal second-quarter results showed weaker demand across its largest markets and raised fresh concerns about the durability of its turnaround. Revenue declined 4% year over year to $2.42 billion, comparable sales fell 9%, and Americas revenue dropped 8%. Competitive pressure is also rising from premium athleisure rivals Alo Yoga and Vuori, which have been gaining share as Lululemon works to reconnect with customers looking for newer silhouettes and styles.
Lululemon stock fell sharply after earnings because weaker traffic, a roughly 20% decline in leggings sales, and another major guidance cut convinced investors that the turnaround could take longer than previously expected. Fiscal 2026 revenue guidance fell to $10.35 billion to $10.50 billion, implying a 5% to 7% decline, while EPS guidance dropped to $9.48 to $9.73 from $10.95 to $11.15. Q2 EPS of $2.92 also included an $0.86-per-share benefit from tariff refunds and associated interest, while Q3 guidance calls for revenue of $2.29 billion to $2.32 billion, down 10% to 11%, and EPS of $0.93 to $0.98.
This week, management said traffic and inconsistent product acceptance remain the central problems, particularly in women’s bottoms. Interim Co-CEO and CFO Meghan Frank said “traffic being the biggest driver is across both regions,” while leggings sales fell about 20% and Lululemon is chasing approximately 20% more volume in products already proving popular with customers. Newer, looser-fitting styles such as Groove Wide-Leg and Align Foldover Jogger are showing better demand, but they have not yet fully offset weakness in Lululemon’s traditional leggings franchise.
Wall Street reinforced that reset after earnings as analysts sharply lowered their expectations for the turnaround. JPMorgan cut its price target from $154 to $95, Morgan Stanley lowered its target from $93 to $83, UBS reduced its target from $120 to $106, Baird cut its target from $140 to $115, Bank of America lowered its target from $140 to $122, and Truist reduced its target from $94 to $82. Incoming CEO Heidi O’Neill takes over on September 8, putting product innovation, traffic recovery, and stabilization in North America at the center of Lululemon’s turnaround for the rest of 2026.
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Is Lululemon Undervalued?
Under valuation assumptions, the stock is modeled using:
- Revenue Growth (CAGR): around 1%
- Operating Margins: around 14%
- Exit P/E Multiple: around 11x
The model assumes almost no annual revenue growth, meaning the valuation does not require Lululemon to quickly return to its former growth profile. The setup can still work if stronger looser-fitting women’s bottoms offset part of the decline in leggings, international markets provide support, and North American sales begin to stabilize.
The 14% operating margin assumption reflects a much tougher earnings environment. Lululemon reported a Q2 operating margin of 18.8%, but a $134.5 million tariff refund added 560 basis points to the quarter, while management expects full-year operating margin to decline by about 530 basis points and Q3 operating margin to fall to roughly 7% from 17% a year earlier. That makes margin stabilization one of the clearest signs that the turnaround is actually improving underlying profitability rather than relying on one-time benefits.
The EBIT chart reinforces that concern. Analysts expect profitability to weaken materially before improving again, which means stronger full-price selling, better-performing products, tighter inventory management, and improved sales leverage will matter more than simple cost cutting if Lululemon wants to rebuild earnings power.
The 11x exit P/E also assumes investors continue valuing Lululemon well below the premium multiples it commanded during faster growth. That makes the model relatively conservative because the upside case does not require a return to the company’s old valuation, only enough operating improvement to support a more stable earnings base.
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Based on these assumptions, the TIKR model estimates a target price of around $128 over roughly 2.4 years. The model was originally calculated when shares traded near $122, but with LULU now around $100, that same target implies about 27% upside from today’s price.
Product recovery remains the biggest business lever through the rest of 2026. Leggings sales fell about 20% in Q2, but stronger demand for looser-fitting women’s bottoms and Lululemon’s faster reorder process could help recover some lost sales if management can get winning styles into stores while those trends remain relevant. Marketing can amplify that improvement through creators, athletes, social content, and community events, but those investments become much more valuable if stronger products give customers a reason to return.
At around $100 per share, Lululemon appears undervalued under the model, but the upside depends on a genuine operating recovery rather than simply a higher valuation multiple. Stronger product launches, improving North American traffic, better full-price selling, disciplined inventory management, and stabilization in EBIT margins would provide the clearest evidence that earnings can recover and support the roughly $128 model target.
How Much Upside Does LULU Stock Have From Here?
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All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
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