Urban Outfitters (URBN – Research Report), the Consumer Cyclical sector company, was revisited by a Wall Street analyst yesterday. Analyst Ike Boruchow from Wells Fargo maintained a Hold rating on the stock and has a $48.00 price target.
Ike Boruchow has given his Hold rating due to a combination of factors affecting Urban Outfitters’ performance and future outlook. The fourth quarter results showed a mixed picture, with the company missing its gross margin and EBIT estimates, which was surprising given the pre-announced holiday sales. However, management at Urban Outfitters provided a reassuring message regarding the growth in comparable sales, particularly in the Anthropologie (Anthro) and Free People (FP) brands, and indicated that the fiscal year numbers are expected to rise. Despite a reduction in first quarter earnings per share, driven by upfront costs and a new distribution center, the confidence in sustained growth in the Anthro and FP brands, coupled with improvements in gross margins, has mitigated some concerns.
The Hold rating also takes into account the impressive double-digit growth of the Free People brand, driven by Free People Movement, and the brand’s continued expansion plans for the year. In contrast, the Urban Outfitters (UO) brand itself showed little improvement, underperforming with comparable sales down significantly and wholesale dropping sharply year over year. The recent hire of a new president for UO North America, Shea Jensen, marks a potential turning point for the brand, with expectations of improvement by the end of the year. Balancing the strong performance of certain segments with the challenges faced by others, Boruchow has adjusted earnings per share estimates upward and increased the price target to $48, while maintaining an Equal Weight (Hold) rating on the URBN stock.
In another report released on February 26, J.P. Morgan also maintained a Hold rating on the stock with a $46.00 price target.
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Urban Outfitters (URBN) Company Description:
Urban Outfitters, Inc. engages in the operation of a general consumer product retail and wholesale business selling to customers through various channels including retail locations, websites, catalogs and mobile applications. It operates through the Retail, and Wholesale segments. The Retail segment contains the Anthropologie, Bhldn, Free People, Terrain, and Urban Outfitters brands; and its Food and Beverage division. The Wholesale segment designs, develops, and markets apparel, intimates, active wear, and home goods under the Free People, Anthropologie, and Urban Outfitters brands. The company was founded by Richard A. Hayne and Scott A. Belair in 1970 and is headquartered at Philadelphia, PA.
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