Stitch Fix's Results Show 'Green Shoots' Emerging: Analysts Take A Look While Stock Jumps Higher

Zinger Key Points
  • Stitch Fix’s FQ3 revenue declines by 16% Y/Y to $323M but comes in higher than “muted” expectations, one analyst says.
  • Gross margin is a “bright spot,” up ~300bps Y/Y to 45.5%, another analyst notes.

Stitch Fix Inc SFIX shares were climbing on Wednesday after the company reported better-than-expected fiscal third-quarter results.

The results came amid an exciting earnings season. Here are some key analyst takeaways.

Truist Securities On Stitch Fix

Analyst Youssef Squali reiterated a Hold rating while raising the price target from $3.50 to $4.00.

Stitch Fix reported revenue of $323 million, representing a 16% year-on-year decline but coming in higher than "muted" expectations of $306 million, Squali said in a note. Although the company also reported its adjusted EBITDA ahead of consensus estimates, this excludes $4.1 million of restructuring costs, he added.

The quarter reflects "gradual improvements in the business as green shoots emerged from mgmt’s ongoing turnaround strategy of strengthening its operational foundation while improving the client experience," the analyst wrote "That said, much work remains as mgmt expects active clients to decline further in F4Q24 and into FY25," he further stated.

Check out other analyst stock ratings.

Wedbush On Stitch Fix

Analyst Tom Nikic maintained a Neutral rating and price target of $3.00.

Although Stitch Fix reported better-than-expected results for the fiscal third quarter, "there's still a lot of heavy lifting to do to stabilize the top line," Nikic said. Although the company's revenue was not good in absolute terms, it did beat the guidance and was "the least-negative growth quarter in seven quarters," he further stated.

Gross margin was a "bright spot," expanding by around 300 basis points (bps) year-on-year to 45.5%, "driven by inventory down -25% YoY and continued improvement in product margins (better mix, lower markdowns)," the analyst wrote.

The company raised its full-year guidance to an organic revenue decline of 17% to 18%, from its previous projection of 18%-20%, he added.

Mizuho Securities On Stitch Fix

Analyst David Bellinger reaffirmed an Underperform rating and price target of $2.00.

"Overall, slightly better revenues and profitability measures surpassed Street expectations in Q3 — although the client downdraft continues," Bellinger wrote in a note.

Management expects active customer counts to contract further in the fourth quarter and into at least early fiscal 2025, the analyst stated.

"Customer acquisition costs are currently elevated given new entrants Shein and Temu (PDD Holdings, Not Covered) are lifting ad rates broadly," he added.

SFIX Price Action: Shares of Stitch Fix had risen by 23.97% to $3.31 at the time of publication on Wednesday.

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Posted In: Analyst ColorEarnings MissesPrice TargetReiterationAnalyst RatingsMoversTrading IdeasDavid BellingerExpert IdeasfashionMizuho SecuritiesStories That MatterTom NikicTruist SecuritiesWedbushYoussef Squali
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