This Once-Hot Stock Now Looks Cheap. Should You Buy?

After outperforming the US stock market for much of the early 2020s, Lululemon’s stock is down nearly 70% from its late-2023 high. Competitive pressures and slowing sales have been headwinds for the athleisure leader. In fact, subpar results caused by competition, tariffs, and product issues led CEO Calvin McDonald to resign. Yet with the shares trading at a big discount—45% below our $295 fair value estimate—Lululemon’s stock looks like a buy for the long term. We think investors are overlooking the company’s opportunities for sales and margin expansion as it builds its international store base and releases new products. This cheap stock was one of Morningstar Chief US Market Strategist Dave Sekera’s stock picks on a recent episode of The Morning Filter podcast, 4 Stocks to Buy With Winning Brands.

We think Lululemon has a solid plan to expand its product assortment and geographic reach while building its core business. While many companies are looking to compete in athleisure, we believe Lululemon will continue to achieve premium pricing due to its brand’s popularity and the styling and quality of its products. Much of its growth is expected to come from international expansion. Sales outside the Americas accounted for 29% of 2025’s total, up from 16% three years prior. In 2035, we forecast Lululemon’s sales outside the Americas will exceed $10 billion (up from $3.3 billion in 2025) and account for half of total sales. Although Lululemon has fallen short in some areas over the past couple of years, we believe that the brand remains popular with its core customers and that its market opportunity is expanding.

Key Morningstar Metrics for Lululemon

• Fair Value Estimate
  : $295
• Star Rating
  : 5 Stars
• Economic Moat Rating
  : Narrow
• Uncertainty Rating
  : High

Economic Moat Rating

Our Narrow Morningstar Economic Moat Rating is based on Lululemon’s intangible brand asset. While the company operates in an industry with many participants and low barriers to entry, its brilliant performance through challenges like covid, inflation, and a general slowdown in activewear spending suggests that its brand is strong enough to consistently outperform peers. Although its merchandise is mass-produced, Lululemon’s prices, productivity, products, and selling model separate it from traditional sportswear companies. We believe that Lululemon has permanently changed how many people regularly dress, rather than being just a fad.

Read more about Lululemon’s moat rating.

Fair Value Estimate for Lululemon Stock

For 2026, we forecast 4% total sales growth, $2.53 billion in EBITDA (21.9% margin), and $12.25 in earnings per share. Based on this forecast, our $295 fair value estimate implies a price/earnings ratio of 24 and enterprise value/EBITDA of 13. Over the next decade, we forecast compound average annual sales growth at 7%. This is a strong rate for any international apparel company, but it is below historical levels. Despite near-term pressure due to tariffs and product discounts, we believe Lululemon can achieve impressive gross margins of around 59% in the long run due to premium pricing and lower costs. We forecast that Lululemon’s annual operating margins over the next 10 years will hold in the low 20s.

Read more about Lululemon’s fair value estimate.

Risk and Uncertainty

Lululemon is exposed to tariffs, since most of its sales are generated by imports to the US from factories in Asia, and weakening economic conditions. Competition is heating up in the company’s core athleisure category. Lululemon must continuously introduce innovative products to maintain its price leadership and remain popular with women. But as specific styles of clothing cannot be patented, the company has limited ability to prevent copycats. To meet expectations, Lululemon will need to generate significant growth in regions where it has limited history and brand recognition. The company faces a CEO change for the first time in more than seven years, and there is a risk that it could fail to find a strong candidate.

Read more about Lululemon’s risk and uncertainty.

Lululemon Bulls Say

• Lululemon’s productivity stands out in the sportswear space. The company’s sales per square foot were more than $1,400 in 2025, and its operating margins are around 20%.
• Lululemon has a big opportunity in mainland China, which accounted for 16% of its 2025 sales, up from 7% in 2022. China is already the second-largest sportswear market in the world.
• Lululemon is often credited with the development of athleisure, a major change in how people dress. Athleisure and sportswear are among a small number of growth areas in the generally low-growth apparel industry.

Lululemon Bears Say

• Competition is ubiquitous in all of Lululemon’s key apparel categories. The company faces challenges from firms like Athleta, Vuori, and Alo Yoga, and Nike is improving its competitiveness through its Skims partnership.
• Lululemon’s sales growth in North America has slowed due to competitive threats and its own missteps. Adding to its problems, higher US tariffs are depressing gross margins.
• Lululemon is searching for a new CEO and is facing pressure from activist investors. The uncertainty could complicate its turnaround efforts.

This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of March 24, 2026, close unless otherwise noted.