Stitch Fix Initiated Buy at Canaccord on Growth Outlook

Stitch Fix has a “significant opportunity” for sales growth, as consumers increasingly turn to Internet shopping, Canaccord says.
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Stitch Fix  (SFIX) - Get Report shares on Wednesday rose after Canaccord Genuity initiated coverage of the personal-shopping service and clothing retailer with a buy rating based on its enthusiasm for the company’s growth outlook.

Canaccord analyst Maria Ripps placed a share-price target of $30 on the company, the highest target on Wall Street, Bloomberg reports.

Stitch Fix shares recently traded at $25.10, up 3%, and have more than doubled in the past three months.

While Stitch Fix operates in a “competitively intense” industry, it has “significant opportunity” for sales growth, as consumers increasingly turn to the internet for their shopping, Ripps wrote in a commentary cited by Bloomberg.

Many fashion companies have struggled with their internet business models. But SFIX’s model “appears to be working for consumers who are turning away from the less personal experience offered in brick-and-mortar retail,” Ripps said.

Stitch Fix is forming a loyal group of customers, which gives the company room for “innovation and new product features that can help the brand gain an increasing share of consumer wallets,” she said.

Last week the company reported weaker-than-expected earnings amid the coronavirus epidemic.

For the fiscal 2020 third quarter ended May 2, revenue registered $371.7 million, below FactSet’s consensus analyst estimate of $418.2 million. And Stitch Fix posted a loss of 33 cents a share, wider than analysts’ forecast of a 15-cent loss.

Stitch Fix Chief Executive Katrina Lake emphasized the positive. “We grew active clients to 3.4 million, an increase of 9%, and grew net revenue per active client by 6%, our eighth consecutive quarter of growth,” she said.