Urban Outfitters Upgraded At Jefferies, 40% Upside Predicted

In a report published Tuesday, Jefferies analyst Randal J. Konik upgraded the rating on Urban Outfitters, Inc. URBN from Hold to Buy, while raising the price target from $36 to $50, which represent 40 percent upside to the stock valuation. "Based on our online and in-store checks and margin sensitivity analysis we believe URBN presents an attractive investment opportunity today," Konik stated. According to the Jefferies report, "URBN is a story of high-quality and differentiated brands, solid management, square footage and global growth, ongoing category extensions and margin expansion opportunity combined with palatable valuation." The analyst also mentioned that proprietary channel checks have revealed that concerns regarding the weakness in the Anthro dresses leading to a broader slowdown for the entire division have been overblown. July receipts indicate improvement in the dress mix, with more casual silhouettes and lower pricing. The analyst expects the mix to continue to improvement with the fall collection. The analyst also expressed confidence in the management taking steps to drive continued and sustainable improvement in the UO division. Channel checks revealed that new product initiatives were gaining traction, while markdown rates were tracking lower, both of which are expected to drive "reactivation of lapsed customers." "We are raising our EPS ests above Cons based on significant margin expansion opportunity at UO from lower markdowns, improved IMUs, & cost leverage," Konik said.