LULU Stock Top Premarket Loser In S&P 500: Wall Street Analyst Says It’s Still An Attractive Bet

• Morningstar analyst David Swartz said China and international sales stayed strong, but margins fell sharply due to tariffs and higher costs. 
• Lululemon also faces brand pressure, with its premium image challenged as competition in the athleisure market intensifies.
• Despite short-term weakness, the analyst remains positive, saying Lululemon still has strong brand power and growth potential. 

Lululemon Athletica (LULU) stock plunged in Friday’s premarket after the athleisure brand delivered a mixed business update that showed modest revenue gains in fiscal first-quarter (Q1) but exposed deep pressure on profitability and outlook. 

While international demand helped lift sales, weakening trends in the Americas and shrinking margins weighed heavily on the overall outlook for the premium athleticwear brand.

LULU’s Margins Squeezed by Costs And Tariffs

Morningstar analyst David Swartz said while Lululemon posted modest top- and bottom-line beats, the reaction in after-hours trading on Thursday was sharply negative as investors focused on slowing underlying demand trends. 

Revenue reached $2.21 billion, but growth in the Americas cooled to just 3%, a notable deceleration from historical levels.

Even though the company beat expectations, it lowered its 2026 forecast to flat or a 1% sales drop, down from earlier growth estimates. It also cut earnings guidance as demand weakened, blaming poor product response and negative media coverage. 

Sales outside North America were the main strength. China grew 30% and other global markets rose 13%. The analyst said this shows Lululemon is relying more on international growth as U.S. sales slow down.

Profits also weakened in Q1. Gross margin dropped to 54.2%, and operating margin fell to 11.2%. Higher tariffs and store costs were the main reasons, showing pressure on the company’s usually strong profit levels.

Barclays lowered its price target to $113 from $161 with an ‘Equal Weight’ rating, citing weak traffic trends in April and May. 

Lululemon Athletica stock traded over 11% lower in Friday’s premarket and is heading towards an eight-year low.  

LULU Remains Attractive Long-Term 

Beyond financial performance, Lululemon also faced reputational headwinds. Swartz pointed to concerns that the brand’s premium identity is being challenged as competition intensifies in the athleisure segment.

Despite near-term turbulence, the analyst maintains a constructive long-term view, saying that Lululemon remains a premium brand with durable pricing power and global growth potential. 

Swartz reiterated that while near-term earnings estimates may be revised lower, the stock appears undervalued relative to its long-term cash flow potential.

LULU Retail Traders View

On Stocktwits, retail sentiment around the stock changed to ‘extremely bullish’ from ‘neutral’ territory the previous day. 

LULU stock has declined nearly 40% year-to-date. 

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