Here's Why Stitch Fix Shares Are Bleeding Today

Analysts slashed their price targets on Stitch Fix, Inc SFIX post dismal Q3 results.

SFIX reported a third-quarter revenue decline of 8% year-over-year to $492.9 million, missing the consensus of $493.26 million. The EPS loss of $(0.72) missed the consensus loss of $(0.55).

Wells Fargo analyst Ike Boruchow maintained an Underweight and cut the price target from $8 to $6. Boruchow acknowledged SFIX's differentiated business model and a large potential market.

However, margin headwinds in the near term and a premium valuation led to a negative view of the stock.

Telsey Advisory Group analyst Dana Telsey reiterated a Market Perform and slashed the price target from $14 to $10. SFIX reported another challenging quarter in what has been a tumultuous stretch for the company.

The soft performance over the last few quarters and ongoing macro challenges led to a significant reduction in the company's workforce to better align costs, Telsey noted. The Freestyle program to expand SFIXs addressable market and drive incremental revenue failed to deliver as per expectations. 

It proves challenging to roll out without adding friction to onboarding new Fix customers. The resultant moderation in net adds (compounded by iOS IDFA) has slowed the model's flywheel while reducing visibility to the ultimate financial algorithm in the intermediate term, Telsey added. 

JPMorgan analyst Cory Carpenter cut the price target to $8 from $10 and kept it Neutral. The 15% reduction to its salaried workforce due to recent business momentum and an uncertain macro environment influenced the re-rating. 

However, he saw the Q3 results as "much better than feared."

Stifel analyst Lamont Williams slashed the price target to $9 from $12 and maintained a Hold. The results came as the company continued to work to optimize the new client onboarding experience. 

He expects the challenges with client acquisition to persist, as evidenced by the company's Q4 outlook.

Price Action: SFIX shares traded lower by 19.1% at $6.29 in the premarket on the last check Friday.

Photo via wikimedia Commons