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Stitch Fix Stock Tumbles; Analysts Cut Targets on Reduced Guidance

Analysts cut their ratings and slash their price targets on Stitch Fix after the online shopping and styling company offers disappointing guidance.
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Analysts on Wednesday were bailing on Stitch Fix  (SFIX) - Get Stitch Fix, Inc. Class A Report, downgrading the stock and cutting their price targets, after the online shopping and styling company cut its financial outlook.

Shares of the San Francisco company at last check gave up nearly 24% to $19.07.

Stitch Fix reported a narrower-than-expected fiscal-first-quarter loss, and sales topped analysts’ estimates. But it gave a less-than-rosy outlook for sales growth and adjusted margins.

Chief Executive Elizabeth Spaulding said during a post-earnings conference call that "we may experience return impacts of cannibalization” with the company’s curated “Freestyle” and “Fix” shopping experiences.

KeyBanc analyst Edward Yruma downgraded the company to sector weight from overweight. 

He said in a research note that while he thought Stitch Fix's personalization capabilities "remain some of the best in apparel e-commerce, and valuation remains accommodating," limited near-term visibility drove him to the downgrade.

"Second-quarter guidance was even more surprising given the strong secular tailwinds within apparel," he said. "We remain attentive for opportunities to take a more constructive view."

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Canaccord Genuity analyst Maria Ripps, who has a buy rating on the company, cut her price target to $38 from $50. She noted that Freestyle "is enabling the company to capture more purchase occasions in footwear, dresses, outerwear, accessories, and loungewear."

"However, Stitch Fix is ramping its promotion of Freestyle slower than it originally anticipated as it focuses on optimizing the onboarding experience and expanding its inventory assortment," she said.

Ripps added that while she was lowering estimates to reflect these headwinds, "the ongoing rollout of Freestyle is expanding Stitch Fix's [total addressable market] and should support a return to double-digit revenue growth next year."

In addition, Evercore ISI analyst Mark Mahaney downgraded Stitch Fix to in line from outperform and sliced his price target to $24 from $68.

He said the 15,000 new additions marked the weakest customer-growth quarter outside the April 2020 Covid-19 quarter, and the company's second-quarter guidance implies a material quarter-over-quarter decline in active customers.

Mahaney said that the core Fix offering has likely "matured out its U.S. market" and that the Freestyle offering has taken longer than expected to kick in.

Wedbush analyst Tom Nikic cut his price target on Stitch Fix to $21 from $45, while maintaining a neutral rating.

He said Stitch Fix was "far-and-away the worst-performing stock" in his coverage intra-quarter. While the quarter itself was fine, Nikic said the issue was second-quarter and full-year guidance.