Lululemon Athletica's (NASDAQ: LULU) share price has declined premarket Tuesday after the stock was downgraded by Bernstein analyst Aneesha Sherman.
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.
It represents the second negative note on the stock in two days after Jefferies reiterated an Underperform rating on Lululemon shares on Monday.
Top Broker Recommendation
- BlackBull 26,000+ Shares, Options, ETFs, Bonds, and other underlying assets – Read our Review
- Admiral Markets More than 4500 stocks & over 200 ETFs available to invest in – Read our Review
- Hargreaves Lansdown The company's website is easily understandable and accessible to a wide range of customers – Read our Review
- eToro Wide range of instruments available to trade – Read our Review
- IG Top-tier regulation – Read our Review
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY
Sherman cut Lululemon to Underperform from Market Perform, lowering the firm's price target on the stock to $290 from $340 per share.
The analyst said in her research note that after Lululemon delivered 25% sales growth and 30% earnings growth for five straight years, it now “has a reset coming.”
In addition, Sherman says that with no more pent-up demand, a more cautious consumer outlook, and negative margin mix shifts, Lululemon's earnings growth will decelerate “materially,” and Bernstein expects the stock's multiple to follow.
On Monday, Jefferies analyst Randal Konik said in a note to clients that the firm's latest store checks show the “flaws” in Lululemon's merchandise strategy.
Konik states that the checks indicate Lululemon's promotional activity remains elevated, and the firm believes there is increased category expansion risk with “heavy” markdowns in outerwear and light traffic in the footwear section of stores.
In addition, the analyst argues that the belt bag fad has peaked, and the company is adding new colours and larger logos to drum up demand.
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.