Clothing retailer Lululemon (NASDAQ:LULU) enjoyed a huge surge back during the pandemic days, though it lost a lot of ground as stores opened up and athleisure clothing lost ground. Now, analysts are comparing it, and unfavorably, to Under Armour (NYSE:UAA), and that’s got investors spooked. In fact, Lululemon is down over 2% in Thursday afternoon’s trading as a result.
Jefferies analyst Randal Konik notes that a combination of factors, including growing competition, shifts in fashion trends, and a set of “strategic missteps,” are likely to work together to hobble Lululemon. Konik’s recent report featured a price target cut, dropping Lululemon to $240 per share, which represents a 37% drop over the previous target.
Certainly, Lululemon has made many gains over the years. Since 2014, It has tripled its share of the market, where competitors either made modest gains or lost ground. But several issues, including missing the move to wide-leg bottoms and losing ground in footwear, threaten to send Lululemon back down to obscurity.
“Strayed Too Far from Its Core”
Konik isn’t the only one spotting stress fractures in Lululemon’s fuselage. Its own CEO, Calvin McDonald, noted that there was “…a shift in U.S. consumer behavior of late” and that the year is kicking off to a slower start than it would have liked. That may not be too much of a problem—after all, Lululemon still has a market cap of around $47 billion at last report—but it’s certainly not the thing you want to hear from the CEO, especially with Konik’s research note in the background.
Is Lululemon Stock a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on LULU stock based on 16 Buys, three Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 0.27% increase in its share price over the past year, the average LULU price target of $492.95 per share implies 35.15% upside potential.
