Morgan Stanley analyst Alex Straton upgraded the shares of Abercrombie & Fitch Co (NYSE:ANF) from Underweight to Equal-Weight and raised the price target from $18 to $51.
ANF's across-the-board 2Q EPS beat outpaced already-elevated expectations into the print, with $1.10 EPS coming in 6x+ the Street's 16 cents, said the analyst.
A&F topline momentum continued for the 7th consecutive quarter, while Hollister comps turned positive for the first time since 2Q19 ex-COVID.
Management's indication of Hollister inflection being led by the women's business stands as a leading indicator for further improvement, the analyst said.
The analyst has become incrementally convinced that A&F may rightfully become one of the few successful Retail turnarounds in history.
The outstanding men's opportunity across both brands, further raw material easing, improved ability to chase, & the fact that fashion runs in cycles, presumably leaving runway for both banners' topline & profitability from here, leaves the analyst thinking aggregate ANF momentum could continue in the near-term.
The updated price target, the analyst said, represents the midpoint of the revised $34 base case & $68 bull case, as the analyst views bull as more readily achievable given conservative base case assumptions.
The analyst, however, maintains healthy skepticism on performance sustainability & consistency in the long-term.
Looking to '24E & beyond, the analyst sees increasing risk with each passing year that the growth will be difficult to sustain & that both or either banner could succumb to fashion cyclicality.
Price Action: ANF shares are trading higher by 0.32% at $50.62 on the last check Friday.