KeyBanc Says Stitch Fix Provides Attractive Entry Point In Light Of Product Launches

Based on a newly differentiated product model and attractive entry points, analysts from KeyBanc Capital Markets anticipate Stitch Fix, Inc. SFIX will drive attractive multi-year growth.

The Analyst

Edward Yruma reiterated an Overweight rating and a $45 price target.

The Thesis

Concerns about net adds have been strongly diminished, following the company’s Oct. 1 earnings release.

“As part of testing on advertising efficacy, SFIX went dark on national TV for 10 weeks during 4Q. The test was to understand not only the immediate impact of TV but the halo impact that TV can have on other advertising. SFIX also tested some local TV during the quarter," Yruma wrote in a note.

Additionally, the implementation of a new chief marketing officer should incite the introduction of 2019 brand advertising, raising overall awareness. Management also aims for 20-percent to 25-percent revenue growth long-term.

The company will implement an in-market stylist and buying team for the U.K. distribution center, as apparel promotional dynamics are more favorable in that particular market, according to Yruma. Other launches seem to be profitable, as well.

“The kids launch is going well and inventory constraints (girls 11-13) should be alleviated in the short term. Systems improvements related to the kids launch (10-12 items per fix and family accounts) can provide additional flexibility to the existing business. Men’s continues to ramp strongly; GM continues to improve (now shipping from three DCs).”

Price Action:

Stitch Fix shares were down 1.7 percent at $25.85 at time of publication on Monday afternoon.

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