11:05 AM EDT, 09/30/2025 (MT Newswires) -- Lululemon athletica's (LULU) sharper-than-expected earnings guidance cut may signal further downside over the next year, Morgan Stanley said Monday in a note.

Earlier this month, lululemon projected diluted full-year fiscal earnings per share of $12.77 to $12.97, down from $14.58 to $14.78, a bigger decline than forecast, Morgan Stanley said.

Morgan Stanley trimmed its 2025 EPS estimate by 10%, citing strong Q2 results overshadowed by a "meaningfully lower" H2 outlook of $7.09 versus its prior $8.82 forecast.

The analyst report cited rising markdowns, elevated inventory, and muted China momentum, while noting that company management now sees a competitive US landscape and delayed recovery in the Americas until 2026.

Morgan Stanley cut its price target lululemon stock to $185 from $223 and maintained its equal weight rating.

Lululemon shares fell 1.3% in recent Tuesday trading.

Price: 176.88, Change: -2.23, Percent Change: -1.25