It’s not often that a yoga festival becomes a stock market story, but that’s exactly what happened at Lululemon Athletica Inc. NASDAQ: LULU right now. The activewear giant organized a major promotional event on a section of the Great Wall of China near Beijing in late May, complete with thousands of attendees, Chinese celebrities, and what was intended to be a regular drumbeat. The problem is that the drum that was used was reported to be of a Chinese origin. It was Japan, and Chinese social media did not take kindly to it.
The backlash from China’s Weibo social network has been massive, with related chats reaching tens of millions of views, and the company was forced to issue an apology. Considering that China has been one of Lululemon’s most important growth markets for the past few years, this is absolutely the thing to stock up on. The stock was already deep in the doghouse, and public mishaps like this deepen the sense that everything could go wrong for Lululemon.
However, for those who can step back and look at the bigger picture, this may be the kind of time that long-term bulls will look back with a wry smile.
A Badly Beaten Stock
This latest gaffe in China did not cause a selloff at Lululemon, but it added to one that has been quietly brewing since late 2023. Shares are down nearly 50% for the year so far, having hit their lowest point earlier this month, and are trading at roughly the same level as eight years ago.
For the brand, not so long ago, one of the best news of the growth of consumer sales, that is an amazing change of fortune. The interesting part is that this fall was not caused by a falling business. Lululemon has continued to beat analyst expectations for both revenue and earnings in recent quarterly reports, including the latest earlier this month.
The problem, instead, has been an overall slowdown in growth and soft forward guidance. Each quarter came with a slightly weaker outlook than the market wanted to hear, and that sense of slowdown is what really did the damage. If a stock has the same value as a growth term, but then stops growing as one, re-rating can be brutal.
Valuation Tells Its Own Story
But that’s where it gets interesting for those willing to look beyond the noise. Lululemon’s price-to-earnings (PE) ratio is currently below 10, the first time it has been at that level in more than a decade. For a profitable, revenue-generating, globally recognized brand with a growing footprint in some of the world’s biggest markets, that much is starting to sound like a bargain.
Compared to Lululemon’s peak value, the current value is almost invisible. That is not because the business is structurally broken, but because the market has gone from extreme optimism to extreme pessimism. The truth, as is often the case, is probably somewhere in the middle. And for patient investors, the middle is exactly where the outside opportunities often reside.
Even the Words of Caution Speak Above
Arguably, the most surprising point about Lululemon’s current setup is what conservative analysts are saying. Indeed, much of the recent commentary has been more bearish, with some calling the company “a ship without rudder in a turbulent sea,” and there is a sense that not much will change until a new CEO, Heidi O’Neill, takes over in September.
However, even with all that skepticism, Lululemon’s consensus rating of Reduce may not tell the full story. Recently updated target prices from most conservative firms still imply upside from current levels. The likes of Daiwa Securities, Deutsche Bank, and Bank of America, for example, each rate Lululemon Holding or equivalent and set targets from $120 to $140, comfortably above when the stock is currently trading at around $110. Combine that with the low price at which the stock is currently trading, and you have the kind of setup that’s hard to ignore.
Lululemon Athletica Inc. (LULU) Price chart for Monday, June, 22, 2026
Risk-Reward Starting to Slope
To be sure, this is not a stock for the faint of heart. There is a real possibility that things could get worse before they get better, especially if the China storm intensifies or if O’Neill’s arrival prompts strategic changes that need time to sleep. The market will likely remain unforgiving until there is solid evidence that the slowdown story has bottomed out.
But patience here may eventually be well rewarded. The China gaffe is the kind of headline that scares off short-term traders in stocks and allows long-term bulls to quietly begin building positions. While the rest of the market is busy pointing and laughing at the lost drum, the smart money may be taking a closer look at what’s next.
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