Shares of Lululemon Athletica Inc. (NASDAQ:LULU) plummeted nearly 20% on Friday following the release of its Q1 earnings. While the company posted results slightly ahead of expectations, its forward guidance fell short, triggering a sharp drop in Lululemon stock. CEO Calvin McDonald cited two key factors for the conservative outlook: ongoing tariff pressure and macroeconomic uncertainty. Investors didn’t take kindly to the cautious tone, with the Lululemon stock dip extending its total loss to over 35% since its January peak.

Analysts Say LULU Still Has Pricing Power

Despite the selloff, some analysts see silver linings. Morningstar’s senior analyst David Swartz told Yahoo Finance that LULU stock retains pricing power and benefits from a well-diversified supply chain. These factors could help shield the brand from margin pressure caused by tariffs and fluctuating material costs.

However, Swartz cautioned that the company’s bigger issue in 2025 is slowing growth in its core North American markets. “LULU has stores in all major U.S. and Canadian metros. We’re now seeing signs of saturation,” he said.

This plateau in mature markets raises concerns about the company’s ability to drive future top-line expansion without bold moves into new regions.

Can China Offset North American Weakness?

Lululemon has turned to China as a growth lever, hoping to tap into the world’s second-largest consumer market. But that pivot may not be enough — or at least not immediately.

Swartz explained, “Beijing is a tough market right now. We’re seeing weak consumer sentiment across most major sportswear brands in China.”

Nike Inc. (NYSE:NKE) and Adidas AG (OTC:ADDYY) have both posted softer-than-expected results in Asia, suggesting that Lululemon might struggle to find traction. Without a strong rebound in Chinese spending, international growth may fail to offset flatlining North American sales.

Is the Lululemon Stock Dip Overdone?

Despite the challenges, Morningstar maintains a $315 price target on LULU, implying some rebound potential after the recent dip. According to the firm, the Lululemon stock dip may have been exaggerated by knee-jerk reactions to the weak outlook.

“Investors may have overreacted,” said Swartz. “If Lululemon can stabilize North American sales and gradually gain share overseas, the current valuation could represent an attractive entry point.”

Other analysts seem to agree. Barchart data shows that Wall Street’s average price target on LULU sits around $353 — more than 30% upside from current levels.

Wall Street Ratings: Moderate Buy Despite Weak Quarter

Before the Q1 earnings report, Wall Street held a “Moderate Buy” rating on NASDAQ:LULU, reflecting cautious optimism. While this rating could shift in the coming weeks, many analysts believe the brand’s loyal customer base and premium positioning still support long-term value.

That said, investors should monitor how Lululemon adapts its strategy. Whether it can successfully penetrate emerging markets or launch product innovations to reenergize domestic sales will likely determine the stock’s direction in late 2025.

Bottom Line: Should You Buy the Lululemon Stock Dip?

The Lululemon stock dip is the result of a disappointing growth outlook, not poor performance. With shares trading more than 35% off their highs, there’s a case to be made for a recovery — but only if management executes well on international expansion and reboots growth in North America.

Long-term investors with a tolerance for volatility may view the pullback as a buying opportunity. Still, caution is warranted until consumer trends and global demand show clearer signs of recovery.

The next couple of quarters will be critical for Lululemon to prove it can reclaim its growth story and investor confidence.

Conclusion

The Lululemon stock dip reflects macro and strategic headwinds, but analyst targets suggest upside remains. For risk-tolerant investors, LULU might just be worth a second look.

Featured Image: Unsplash @ Marco Tjokro

Please See Disclaimer