Truist Securities has downgraded Lululemon's stock from Hold to Sell, prompting a drop of 1.7% in pre-market trading. The firm has also reduced its price target from $115 to $94, citing a lack of visibility for a significant turnaround. This marks one of the most pessimistic assessments of Lululemon in recent memory, following a challenging quarterly earnings report.
In the first quarter, Lululemon reported revenue of $2.47 billion and earnings per share (EPS) of $1.69, surpassing expectations slightly. However, the underlying performance raised alarms as comparable sales in the Americas declined for the fifth consecutive quarter, and management lowered its full-year revenue guidance to a range of $11.0 billion to $11.15 billion, alongside a significant drop in EPS outlook.
The overall sentiment on Wall Street has significantly deteriorated, with Lululemon now holding only one Buy rating against 30 Holds and three Sells. Morgan Stanley initiated its coverage on the stock with an Underweight rating and a price target of $93. Investors are wary, especially given that these targets align closely with industry pessimism.
New CEO Heidi O’Neill, taking charge in September, faces a daunting task ahead. Truist highlighted the substantial pressures on the brand without a clear catalyst for recovery. As of now, strategic changes from O’Neill remain undisclosed while market conditions have not been favorable. The broader market decline, with the Nasdaq down 1.0%, adds to Lululemon's struggles. The combination of these factors leaves the stock precariously positioned at or near its 52-week low, with analysts watching closely for signs of change.
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