Stitch Fix Is A 'Modern Archetype Of The Heyday Department Store,' KeyBanc Says In Bullish Initiation

Stitch Fix, Inc. SFIX has completely revolutionized retail with its personal style recommendation model, and its stock should show steady growth in the coming year, according to KeyBanc Capital Markets.

The Analyst

Analyst Edward Yruma initiated coverage of Stitch Fix with an Overweight rating and a price target of $38.

The Thesis

“Stitch Fix’s use of data is a significant advantage relative over traditional retailers, as it allows the platform to build a scalable, yet human, recommendation model,” Yruma said in a Monday note. (See the analyst's track record here.) 

The core womens segment should continue to grow market share, and the mens, plus-sized and kids sections should help Stitch Fix grow revenue by 20 percent, the analyst said.

• “SFIX serves as the modern archetype of the heyday department store — helping consumers understand what is new and interesting, offering a wide selection and offering a very personalized edit,” Yruma said.
• With 85 data scientists, 3,700 customer stylists and a specific data capability, SFIX is able to gain a deep understanding of each and every consumer, the analyst said. 
• KeyBanc’s Key First Look Data shows strong customer loyalty and low customer turnover, Yruma said. 
• The online retailer has strong client feedback, with a reported 85 percent of shipments receiving feedback, according to KeyBanc. 

Price Action

Stitch Fix shares were trading up more than 9 percent at $33.93 at the time of publication Tuesday afternoon. 

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Photo courtesy of Stitch Fix.