StitchFix style cards
Courtesy of StitchFix
With about a third of its shares sold short, Stitch Fix has been one of many retailers caught up in the recent short selling frenzy. That’s pushed the shares up 55% year to date, and earned it another downgrade Monday.
Stifel analyst Lamont Williams cut his rating on Stitch Fix (ticker: SFIX) to Hold from Buy, while raising his price target to $83 from $64. Like so many other analysts scrambling to update their models on these stocks, he writes that the move comes after Stitch Fix blew past his price target, and he couldn’t justify raising it any higher.
He notes that the shares are changing hands at 4.3 times his fiscal 2022 enterprise value to revenue estimates, well ahead of peers, and far above where it traded pre-pandemic. While he does think that the company can emerge stronger from the Covid-19 crisis, he writes “the recent multiple expansion to the current level, ahead of the recovery, results in a risk/reward balance” that supports moving to the sidelines.
Williams also echoes other analysts in this position in voicing his ongoing belief in the upbeat long-term outlook for the shares. He highlights the Direct Buy business which allows people to shop online as they would at more traditional retailers, which “effectively broadens the company’s addressable market,” and Stitch Fix’s well honed data science capabilities. Yet with the shares up so sharply, this news is already baked into the stock, he writes.
Stitch Fix has gained 274% in the past 12 months and run up 55% since the start of 2021. It’s one of several retailers that have soared in recent weeks as investors target highly shorted stocks, hoping to push bears to abandon their bets and buy the stock, further fueling a rally.
However, the shares are down 4.8% to $91.01 on Monday. Bed Bath & Beyond (BBBY), which has also been swept up in the recent trading frenzy, is also falling today. It too was downgraded, although analyst moves have had little impact on these stocks in recent weeks.
Write to Teresa Rivas at [email protected]
