Lululemon Athletica, the popular athletic apparel company, has been a favorite among investors this year. However, analysts tracking the stock are now expressing less confidence in its future prospects.

Despite inflation putting pressure on household budgets, Lululemon's stock has gained an impressive 43% this year, thanks to its success in attracting consumers, particularly in China. Additionally, news of the stock joining the S&P 500, alongside major players like Microsoft, has contributed to its momentum.

The upcoming third-quarter earnings report, scheduled for Thursday, will be a crucial test for the company. Investors will closely scrutinize comments about sales trends and consumer health.

Prior to this, retail analyst Rick Patel from Raymond James downgraded Lululemon's stock rating from Strong Buy to Outperform on Tuesday. Although both ratings reflect a positive outlook, Strong Buy implies outperformance against the S&P 500 in the next six months to a year, while Outperform extends the timeline to 12-18 months.

While the nuanced difference in ratings may not be significant, the rationale behind the downgrade is worth noting. Patel stated that the recent rally in the stock suggests that some of its potential price gains have already been factored into its current value.

This sentiment aligns with Wells Fargo analyst Ike Boruchow's views, as he also downgraded Lululemon shares from Overweight to Equal Weight in a note to clients on Monday. Boruchow believes that several factors that previously supported his confidence in the stock have now played out.

However, it is important to highlight that the majority of Wall Street investors maintain their bullish stance on Lululemon's stock. More than 70% rate it as a Buy, with seven suggesting holding and two recommending selling, according to FactSet.

On Tuesday, Lulu shares experienced a slight 0.5% decrease, closing at $458.60, while the S&P dipped 0.2%. The final verdict will be delivered by investors this week.

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