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Lululemon stock is a crash waiting to happen, analyst argues

Lululemon is slated to report second-quarter earnings on Sept. 1, and some Wall Street analysts are feeling cautious headed into the numbers and guidance.

Shares of the premium athletic-wear maker are down 21% year to date, hammered recently amid warnings on slowing demand (and rising inventories) for workout gear from retailers Kohl's, Macy's, Under Armour and others. The industry commentary has analysts concerned that Lululemon will be forced to slash its super optimistic guidance offered earlier this year about doubling sales by 2026.

Ahead of the potentially dour news, Jefferies retail analyst Randal Konik is out with a bearish note for clients. Here are the key details of Konik's Lululemon call.

  • Price Target: $200

  • Rating: Underperform

  • Downside Assumed: About 35%

  • Lululemon stock movement on Monday as of midday: -0.3%

"The quarter should be strong (belt bags likely helped too) and we expect the company's fiscal year 2023 outlook to be reiterated, but that's not our concern," Konik wrote. "Our downgrade thesis is based on a view that long-term projections are aggressive across total revenues, EBIT [earnings before interest, taxes] margins, men's, and international. We believe in coming quarters, Lululemon will have to walk back its long-term projections as competition rises, end markets weaken, and promos increase industry-wide."

From the Yahoo Finance Live archive: Konik talking Lululemon in mid-July

BEIJING, CHINA - JULY 4, 2021 - Photo taken on July 4, 2021 shows a Lululemon store in Beijing, China. Lululemon is known as the
Photo taken on July 4, 2021 shows a Lululemon store in Beijing, China. Lululemon is known as the "No. 1 professional sports brand in Canada". (Photo credit should read Costfoto/Barcroft Media via Getty Images)

He added that while athletic apparel and footwear sectors should continue to grow overall, "COVID likely pulled forward demand with Lululemon one of the biggest beneficiaries. As a result, we see risks to consensus estimates ahead as competition rises and headwinds grow."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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