Urban Outfitters Pops On Analyst Upgrade, Is This An Opportunity To Sell?

Summary:

• Shares of Urban Outfitters, Inc. URBN climbed 4 percent higher Wednesday morning. 
• Morgan Stanley upgraded the clothing retailer from Equal-Weight to Overweight.
• However, the stock’s market cycles suggest a move lower by February and beyond.

Urban Outfitters Stock Weekly Chart

Morgan Stanley equity analyst Kimberly Greenberger upgraded Urban Outfitters to Overweight, with a price target of $44. Of the 10 analysts covering Urban Outfitters, none had previously recommended buying the stock.

Yet, given Morgan Stanley’s recent survey of 2000 consumers on topics related to clothing preferences, Greenberger believes the retailer derives competitive advantage from its fashion credibility relative to companies in the same industry.

We disagree on her recommendation, based on our analysis of the market cycles for the stock. We can see that shares are in the declining phase of their current cycle. Our projections suggest a price of around $30 by February.

Beyond that, we believe the stock is in a negative cycle pattern, which suggests a downward zig-zag for months to come. Likewise, its head and shoulders top projects to a price around $20 later this year.

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