Morgan Stanley Downgrades Lululemon On Soft Outlook: Retail Investors View 20% Stock Dip As Buying Opportunity

Morgan Stanley downgraded Lululemon (LULU) shares to 'Equal Weight' from 'Overweight' on Friday after the athleticwear company gave a soft second-quarter forecast and cut its annual profit outlook.

Shares of the company fell 20% on Friday and ended as the worst-performing stock on the S & P 500 (SPX) last week.

However, users on Stocktwits responding to a survey called the dip a buying opportunity, saying they“easily” expect the shares to climb 10–30% from here.

Retail sentiment held in the 'extremely bullish' territory.

A user said the "guidance was lowered for obvious reasons - Trump tariffs."

A few users also noted the possibility of a U.S.-China trade deal in the near future, which could significantly boost several companies, including Lululemon.

Morgan Stanley, which slashed its price target on LULU to $280 from $346, said that even if profitability improves this year, attention will stay on how the North American business performs, according to The Fly.

The firm expressed lower confidence in that segment's outlook.

It lowered its estimates of the company's medium-term performance and said it views consensus forecasts as“fair-to-high."

Investment firm CICC also reduced the company's stock rating to 'Market Perform' from 'Outperform', with a price target of $280.49.

Currently, 19 of the 37 analysts covering the stock have a 'buy' or higher rating, 14 rate it 'hold,' and four rate it 'sell' or lower, according to Koyfin data. Their average price target is $308.77, signaling an upside of 16.4%.

Lululemon shares are down 30.6% year to date.

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