Wunderlich Expresses Confidence In Urban Outfitters

Wunderlich reiterated its Buy rating and $42 price target on Urban Outfitters, Inc. URBN Thursday following strong holiday sales.

Analyst Eric Beder noted that the “Holiday results lead us to be even more confident the company is nearing a turnaround in FY16, which we believe could be material and drive strong bottom-line upside earlier than we had originally expected.

“We remain buyers of URBN and believe there is now reason to be aggressive in the near term; we believe the company's business model remains among the best in the specialty retailing space.”

“Holiday (nine weeks ending January 3) comps of +4 percent were above Street expectations for 4Q of +2.5 percent. Comps of +17 percent for Free People (versus +21 percent) and +5 percent from Anthro (versus +11 percent) were the solid results that we were expecting. The key upside surprise was Urban, which registered a +1 percent comp (versus a -6 percent last year),” according to the note.

“While we are not projecting the Urban division to materially turn until they anniversary the increase in AURs in 2HFY16, we are now materially more certain that the turn will come and, with higher AURs, will drive margin and bottom line upside,” Beder concluded.

Urban Outfitters recently traded at $36.58, up 3.41 percent.