Shares of Lululemon Athletica fell around 3% to $197.80 in afternoon trading on Tuesday after Wells Fargo reduced its price target on the stock to $205 from $225.
The brokerage said the repeal of the US de minimis customs exemption could dent the athletic wear maker’s profitability and margins.
The exemption had allowed duty-free entry into the US for international shipments worth less than $800 with minimal paperwork.
Lululemon has relied heavily on Canadian distribution centers to supply its US e-commerce business.
Wells Fargo analysts estimate that the rule change could cut between $0.90 and $1.10 per share from earnings.
Brokerages adjust forecasts amid challenges
The Wells Fargo downgrade follows a string of price target cuts from other brokerages.
On August 11, Baird lowered its price objective on Lululemon to $260 from $340, though it maintained an “Outperform” rating.
The firm noted that despite the stock’s sharp selloff, the company continued to show strength across geographies and categories in the first quarter of 2025.
TD Cowen also revised its price target downwards, reducing it to $298 from $321 while retaining a Buy rating.
The firm highlighted tougher macroeconomic conditions, rising competition, and inconsistent product performance in non-core categories as reasons for lowering its expectations.
At the same time, William Blair’s Sharon Zackfia expects the company to hit the high end of second-quarter guidance, with revenue growth projected at 8%.
She forecasted gains across both brick-and-mortar stores and e-commerce channels, adding that China should provide an additional lift as sales accelerate following the timing of the Lunar New Year.
Stock valuation near historic lows
Once a market darling, Lululemon has seen its fortunes shift.
Shares are down 64% from their all-time highs, marking their steepest decline since the global financial crisis of 2008–09.
Year to date, the stock has dropped roughly 48%.
The sharp fall has left the company trading at a price-to-earnings ratio of 13.39, its lowest in five years and far below the lofty multiple of 90 it commanded in 2021.
Some investors see the lower valuation as an opportunity, arguing that even modest revenue growth could support long-term earnings expansion, especially with a significant buyback program in place.
Analysts remain divided on outlook: should you buy?
Market sentiment remains mixed.
Data compiled by LSEG shows that of 33 brokerages covering the company, 16 rate the stock a “buy” or higher, 14 rate it a “hold,” and three have a “sell” rating.
The median price target among analysts sits at $277.50, well above the current share price.
Analysts at The Motley Fool UK note that if Lululemon can maintain stable margins and continue to expand internationally, even low single-digit revenue growth could eventually translate into double-digit earnings growth.
That long-term view may encourage investors to hold the stock despite short-term headwinds.
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