NEW YORK (TheStreet) -- Shares of Urban Outfitters Inc. (URBN) are down 6.33% to $28.88 in early morning trading on Tuesday after the company was downgraded at William Blair and Telsey Advisory Group.
William Blair downgraded the American multinational clothing and lifestyle retail corporation to "market perform" from "outperform"
The firm said Urban Outfitters is seeing lower margins and lacks near-term visibility.
"We are downgrading Urban Outfitters to Market Perform on a disappointing third quarter and fourth-quarter outlook and continued lack of visibility on the timing of a sustained turnaround in profitability at the Urban Outfitters division, notwithstanding easier upcoming comparisons," said William Blair analyst Sharon Zackfia.
Telsey also downgraded the company to "market perform" from "outperform," and set a price target of $33 from $44.
The firm said it lowered Urban Outfitters' rating because potential turnaround has been delayed because of continued margin challenges.
Read more about Urban Outfitters here: Urban Outfitters Plunges on Earnings: What Wall Street's Saying
Separately, TheStreet Ratings team rates URBAN OUTFITTERS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate URBAN OUTFITTERS INC (URBN) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- URBN's revenue growth has slightly outpaced the industry average of 1.1%. Since the same quarter one year prior, revenues slightly increased by 7.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- URBN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future problems.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market on the basis of return on equity, URBAN OUTFITTERS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- 41.62% is the gross profit margin for URBAN OUTFITTERS INC which we consider to be strong. Regardless of URBN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, URBN's net profit margin of 8.32% compares favorably to the industry average.
- You can view the full analysis from the report here: URBN Ratings Report