What Happened?

Shares of athletic apparel retailer Lululemon (NASDAQ: LULU) fell 1.6% in the afternoon session after Jefferies lowered its price target on the stock, adding to investor concerns about the athletic apparel maker's growth prospects. The investment firm reduced its price target to $150 from $160 while maintaining its "Underperform" rating. This bearish view comes amid broader worries about the company's performance, particularly a slowdown in U.S. traffic, which is a significant risk given the U.S. market represents three-quarters of Lululemon's revenue. Compounding these concerns, the company is set to report second-quarter results on September 4, with analysts' consensus estimates suggesting a nearly 10% decline in earnings per share from the year-ago period, even as sales are expected to grow.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Lululemon? Access our full analysis report here, it’s free.

What Is The Market Telling Us

Lululemon’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 14 days ago when the stock dropped 3.2% on the news that investors took some profits off the table as markets awaited signals on future monetary policy from the Federal Reserve's Jackson Hole symposium later in the week. 

The downturn in the market was largely attributed to a significant sell-off in megacap tech and chipmaker shares. Nvidia, Advanced Micro Devices (AMD), and Broadcom all saw notable drops, dragging down the VanEck Semiconductor ETF. Other major tech-related companies like Tesla, Meta Platforms, and Netflix were also under pressure. 

A key reason for this trend is that much of the recent market gains have been concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed.

Lululemon is down 46.5% since the beginning of the year, and at $199.37 per share, it is trading 52.7% below its 52-week high of $421.16 from January 2025. Investors who bought $1,000 worth of Lululemon’s shares 5 years ago would now be looking at an investment worth $500.55.

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