Trouble is building for clothing retailer Lululemon (NASDAQ:LULU) as this former pandemic darling comes under increasing fire. In fact, a new downgrade from Jefferies is making quite a few investors think twice about their positions with Lululemon, as Lululemon shares fell fractionally in Tuesday afternoon’s trading.
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Jefferies, via analyst Randal Konik, doesn’t like what it sees when it comes to Lululemon. Of particular concern is Lululemon’s fashion choices. The color assortment is lacking, Konik notes, as is the total of merchandise on sale racks. In addition, there is a large amount of unsold outerwear during the time of year when outerwear demand is at its lowest. Except, of course, for those people thinking ahead to the next major season for outerwear. But that’s not a reliable metric for businesses to use in planning, really.
At any rate, Lululemon is suffering under changing tastes and rising competition, not to mention customer spending habits that have been hit hard by rising inflation. As a result, Jefferies lowered its rating to Underperform, and cut the price target to $240 per share.
It’s Not All Negative
While Jefferies had a brutal analysis waiting, not everyone is so down on Lululemon’s chances. A report from Zacks, for example, notes that Lululemon’s “Power of Three X2” growth plan is picking up steam, and it’s making inroads with a greater focus on physical retail. It’s also been bolstering its e-commerce infrastructure, though how that helps in a retail market that’s in overall decline is a little less than certain. Still, even as one analyst looks for disaster, another looks for triumph. That’s the nature of the field in a nutshell, really.
Is Lululemon Stock a Buy or Sell?
Turning to Wall Street, analysts have a Strong Buy consensus rating on LULU stock based on 17 Buys, three Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 10.82% loss in its share price over the past year, the average LULU price target of $472.60 per share implies 46% upside potential.
Is It Wise to Allocate $1,000 Toward LULU Stock Right Now?
Before you hurry to invest in LULU, think about the following:
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