Lululemon: 2 Signs the Bottom Is In, and 1 Sign It Isn’t

Key Points

• The stock is down 60% from January’s peak but shows signs of a bottom.
• Oversold technicals and a fresh 75% upside analyst target support the case for a recovery rally.
• Not everyone on Wall Street is convinced, however, and Lululemon will have to work hard to regain trust. 

Lululemon Athletica Inc NASDAQ: LULU, once the darling of all retail stocks, has endured one of the ugliest downtrends in the industry this year. Its shares are down about 60% from their January peak, and every bullish rally attempt in the nine months since has been beaten back by the bears. Even though its revenue sits close to all-time highs, and its price-to-earnings (P/E) ratio is the lowest it’s ever been, the stock is still trading back at 2019 levels. 

The good news for those on the sidelines is that the disconnect is becoming harder to justify. After months of relentless selling, there are signs the bears might finally be running out of steam. The key question is whether Lululemon has finally found a bottom—or if the stock is entering another extended downtrend. There are two compelling reasons to believe a bottom may be in place, and one reason that suggests caution is still warranted.

Technical Picture: Early Signs of a Bottom Forming

The first thing to note is that from a technical perspective at least, Lululemon is finally catching its breath and putting up a strong line of defense.. The stock hasn’t set a new low since the middle of September, and last week’s weakness was quickly bought up ahead of the weekend before it could retest those levels. Shares have already pushed higher to start the week, showing buyers are becoming more aggressive.

The stock’s Relative Strength Index (RSI) has also started climbing out of extremely oversold territory and trending upward in recent weeks, a classic sign that bearish momentum is fading. Combined with the fact that every dip since September has found higher short-term support, the evidence suggests the sellers may have exhausted themselves.

The long-term trend is still ugly, but the short-term behavior is actually quite bullish. As long as the $160 line continues to hold, there is, at the very least, a temporary bottom taking shape.

Analyst Support: Big Upside Targets Still in Play

The other reason adding weight to the argument that we’re looking at a solid entry opportunity is that even with sentiment crushed, not every analyst is throwing in the towel—far from it. Take Janine Stichter and her team from BTIG Research, for example, who reiterated their Buy rating last week along with a $303 price target. 

In a note to clients, they flagged the room for operational improvement and execution gains, while wondering if the worst-case scenario is now baked into the stock. From Monday’s closing price around the $172 mark, they’re looking for a targeted upside of nearly 75% - not bad for a stock that’s been sinking like a stone for most of the year. 

What makes that call even more compelling is the valuation reset already underway. Lululemon’s P/E ratio has plunged from nearly 30 at the start of 2025 to below 12 today, meaning it wouldn’t take much of an upside surprise in the next earnings report to spark a recovery. When you consider that Nike Inc NYSE: NKE, another beaten-down retail stock, still trades at 35 times earnings, Lululemon’s risk/reward setup looks especially appealing right now.

Bear Case: Wall Street’s Skeptics Aren’t Done Yet

Still, it’s not all sunshine and rainbows. Several analysts remain unconvinced that Lululemon is out of the woods, and just last week, analysts from Bernstein cut their Outperform rating down to Market Perform. 

They made the point that near-term catalysts are lacking and execution risk remains elevated.

The fact that they’re making that downgrade when the stock has already been down 60% since January carries weight.

But you can’t help but get the sense that the time to issue that warning was earlier in the year.

With the technical and price action now both suggesting a bottom forming in front of our eyes, we’re inclined to say actions speak louder than words. 

Outlook: Cautious Optimism With a Clear Line in the Sand

For now, it’s a story of extremes: deeply oversold, widely doubted, but still fundamentally strong. Investors might have to pinch their noses for a while, but that is a potent combination for a comeback. 

It could be tough to maintain the upward momentum if any more downgrades land in the coming weeks, but if shares can continue to hold above $160 into November, it would all but confirm that the bottom is already in.