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Stitch Fix Downgraded by MKM to Sell on Valuation; Shares Fall

'While valuation of the retail sector/e-commerce retail has increased, Stitch Fix has moved too far too fast,' wrote MKM analyst Roxanne Meyer.
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Stitch Fix  (SFIX) - Get Stitch Fix, Inc. Class A Report shares fell Friday after MKM Partners analyst Roxanne Meyer downgraded the online personal shopping company to sell from neutral, citing valuation.

Meyer raised her price target to $28 from $25, however, reflecting recent market activity. The stock was trading at $37.15, down 2.39%, in pre-market trading Friday, but is up 54% in the last six months through Thursday.

“While valuation of the retail sector/e-commerce retail has increased, SFIX has moved too far too fast,” Meyer wrote in a commentary cited by Bloomberg.

Visibility for SFIX’s Direct Buy initiative “remains low,” Meyer said. And she sees a problem in that the cash part of executive compensation in fiscal year 2021 will be “almost solely based on top-line results, … creating risk to execution and particularly to margins.”

On Thursday, Wells Fargo Securities also downgraded Stitch Fix, to underweight from equal weight, although it raised its price target to $27 from $18.

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Stitch Fix reports earnings Monday after the market close.

In September, online retail colossus  (AMZN) - Get, Inc. Report launched a shot across Stitch Fix’s bow, expanding its personal shopping platform to include men’s fashion.

Amazon’s service is available on mobile devices only for Prime customers in the U.S. It’s called Personal Shopper by Prime Wardrobe, and was introduced for women’s fashion in July 2019.

Customers pay $4.99 a month, and in exchange receive a parcel every month of up to eight items. The package includes personalized clothing choices meant to meet their style and budget tastes as specified in an introductory survey.

Shipping is free, and customers have a seven-day window for returns.

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