Stitch Fix Rallies After Quarterly Earnings Top Projections

Stitch Fix Inc. shares soared after better-than-expected fiscal first-quarter results led to Wall Street analysts boosting their growth outlooks.

The San Francisco-based firm’s profit was 9 cents a share in the quarter on net revenue of $490.4 million, the company said in a statement. That exceeded the average analyst estimates for a loss of 18 cents and net sales of $481 million, according to Bloomberg data. The stock jumped as much as 53% Tuesday, the most on record.

Stitch Fix is benefiting from a “generally improving” U.S. apparel spending backdrop, according to Morgan Stanley analyst Lauren Schenk. Better-than-feared top-line growth and a beat for full-year revenue guidance “caused the stock to squeeze,” Schenk wrote in a note to clients.

Stitch Fix Rallies After Quarterly Earnings Top Projections

Analysts at Deutsche Bank, Goldman Sachs and RBC Capital Markets raised their share price targets after the company reported earnings results. Here’s what they had to say:

  • “We continue to believe the share shift to e-commerce will become more apparent, driving a catch-up in SFIX performance,” Goldman analyst Heath Terry said, raising the share price target to $58 from $34.
  • RBC analyst Mark Mahaney sees Stitch Fix benefiting from the Covid-19 accelerated secular shift to online. He raised his target to $64 from $50.
  • Stitch Fix could prove to be one of the biggest beneficiaries of Covid over time with tailwinds like the accelerated transition to online and continued physical store closures, Deutsche Bank analyst Kunal Madhukar said, boosting his target to $54 from $34.
  • All three firms maintained their buy-equivalent ratings

Some Wall Street analysts had been cautious going into the earnings report after a rally of 40% so far this year, based on Monday’s closing price. Short interest as a percentage of the float was 38%, according to financial analytics firm S3 Partners.

Morgan Stanley’s Schenk, who has an underweight rating on the stock, cautioned that growth is “coming at a higher cost,” with management expecting to increase second-quarter marketing spending by nearly 72%.

Stitch Fix also announced that it hired Inc. veteran Dan Jedda as chief financial officer, effective Dec. 9. Jedda was Amazon’s vice president and CFO for digital video, digital music, advertising and corporate development.

©2020 Bloomberg L.P.

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