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Lululemon Athletica (LULU) Could Be 38% Undervalued After Guidance Cut

Simply Wall St · 2d ago

Lululemon athletica (LULU) is back in focus after second quarter results showed year over year declines in sales, net income, and earnings per share, along with a cut to full year revenue and profit guidance.

The earnings announcement and guidance cut hit sentiment hard, with the share price falling 17.4% to 17.7% on the day and contributing to a 1-month share price return of down 21.8% and a year-to-date share price return of down 52.3% for lululemon athletica.

Scan beyond lululemon athletica's sharp pullback and review a curated set of resilient companies in our 81 resilient stocks with low risk scores that some investors use as a defensive watchlist during periods of stock specific stress.

After a move that has taken lululemon athletica down more than 50% year to date, analysts still see fair value about 10% above the current price, while at least one intrinsic model points closer to a 17% premium. Which reference point matters more for you as the valuation work begins next?

Most Popular Narrative: 37.8% Undervalued

Compared to the last close at $100.61, the most followed narrative on lululemon athletica points to a fair value of $161.80, which implies a wide valuation gap that some investors frame as potential upside if the thesis plays out.

Using these facts, if I project the Free Cash Flow for the next 10 years and discount it back at the cost of capital, Lululemon''s net present value of a stock stand at $161.80.

Read the complete narrative.

Curious what has to happen in practice for lululemon athletica to justify that price tag? The narrative leans heavily on disciplined margins, steady top line progress and a specific cost of capital profile. The full write up clarifies how these moving pieces fit together and what kind of earnings power is built into that $161.80 view.

Result: Fair Value of $161.80 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, lululemon athletica still faces real pressure from flat to declining sales in the US and Canada, as well as ongoing questions around women’s product momentum.

Find out about the key risks to this lululemon athletica narrative.

Another View on lululemon athletica’s Value

While the user narrative points to a $161.80 fair value using a custom cash flow model, the SWS DCF model arrives at a future cash flow value of $85.82 per share. On that view, lululemon athletica at $100.61 screens as overvalued. Which version of “fair value” appears more realistic to you?

For readers who want to stress test that second view in detail, it can help to walk through the full SWS DCF model step by step. Look into how the SWS DCF model arrives at its fair value.

Here is how that DCF output currently looks for lululemon athletica.

LULU Discounted Cash Flow as at Sep 2026
LULU Discounted Cash Flow as at Sep 2026

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out lululemon athletica for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 47 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If this mix of pressure and potential around lululemon athletica feels finely balanced, consider reviewing the full picture promptly so you can shape your own takeaway. You can start by weighing up the 2 key rewards and 1 important warning sign.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.