2 Analysts React To Urban Outfitters' Sales Miss, Stock Drop

Urban Outfitters, Inc. URBN shares are in free-fall mode after reporting a third-quarter earnings miss on Tuesday.

Encouraged By Improved Results

Baird analyst Mark Altschwager said he was encouraged by Urban Outfitters improved results fueled by a resurgence at Anthropologie and strength at Free People, but a cautious outlook in the fourth quarter is responsible for the drop in shares.

The analyst trimmed his 2019/2020 EPS estimates to represent a more conservative view on fourth-quarter margins, but says in the long term, he believes with its differentiated brands/concepts and digital strength, Urban Outfitters is one of the better positioned specialty retailers in his coverage universe.

“As shares pull back from recent highs, we think risk/reward looks more intriguing; however, we remain disciplined on valuation given sector headwinds,” he wrote in a note.

Baird maintains a Neutral rating and raised its price target from $25 to $26.

Waiting For Better Valuation

Wedbush analyst Jen Redding said inventory overhang has rightfully frightened the bulls amid a strong start to the holiday season.

Although the analyst is encouraged by the positive comps across the board for Urban Outfitters brands, Redding says third-quarter results are likely to weigh on the retail sector as a whole, particularly in teen apparel retailers.

Wedbush says shares could begin to look oversold of declines continue but the firm remains on the sidelines as it believes valuations are fair at current levels.

The analyst maintains a Neutral rating on the company and lowered her price target from $33 to $28.

Price Action

Urban Outfitters shares traded down 15.6% to $24.31 at time of publication.

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