TLDR
- Lululemon stock fell 1.7% in pre-market trading after Truist downgraded it to Sell from Hold
- Truist slashed its price target to $94 from $115, citing limited turnaround visibility
- Americas comparable sales fell for a fifth straight quarter in Q1
- LULU now has just one Buy rating vs. 30 Holds and three Sells on Wall Street
- Incoming CEO Heidi O’Neill takes over in September facing a tough road ahead
Lululemon stock dropped 1.7% in pre-market trading on Wednesday after Truist Securities downgraded the stock to Sell from Hold and cut its price target to $94 from $115.
Lululemon Athletica Inc., LULU
The stock was already trading near the lower end of its 52-week range, well off its 52-week high of $233.75.
Truist cited very limited visibility into any credible turnaround and described meaningful pressure on the brand as the key reasons behind one of the most bearish formal calls on LULU in recent months.
The downgrade follows a rough Q1 earnings report in early June. Revenue came in at $2.47 billion and EPS at $1.69, both narrowly beating consensus, but the details underneath were harder to ignore.
Americas comparable sales fell for a fifth consecutive quarter. Gross margin contracted. Management then cut full-year revenue guidance to $11.0–$11.15 billion and trimmed its EPS outlook by more than a dollar.
That report triggered a wave of negative analyst actions, and the Truist move is the latest in that sequence.
Wall Street Turns Bearish
LULU now has just one Buy rating on Wall Street, set against 30 Holds and three Sells. Morgan Stanley had already resumed coverage on July 6 with an Underweight rating and a $93 price target, making Truist’s $94 target consistent with the most bearish end of the Street.
The analyst consensus has shifted noticeably since the Q1 print, and the downgrade cycle shows little sign of reversing near-term.
New CEO Faces a Difficult Task
Incoming CEO Heidi O’Neill is set to take the helm in September. Truist described the task ahead as exceptionally difficult given the current brand pressure and the lack of a clear catalyst for improvement.
There is no indication yet of what strategic changes O’Neill may bring, and Wall Street appears to be in wait-and-see mode.
The broader market did not help on Wednesday. The Nasdaq fell 1.0% and the S&P 500 edged down 0.4%, putting pressure on growth and consumer discretionary names across the board.
A softer-than-expected June Producer Price Index reading offered some macro relief, but it was not enough to offset the company-specific headwinds hitting LULU.
The stock is now trading near the bottom of its 52-week range as investors wait for signs that the business is turning a corner.
Truist’s $94 price target sits well below current trading levels, and with the stock already down sharply from its highs, the downgrade added fresh pressure in an already difficult session.
Morgan Stanley’s $93 target remains the lowest on the Street, with Truist now close behind.
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