Bernstein reiterates Stitch Fix stock rating, sees growth in FY26 By Investing.com

On Wednesday, Bernstein SocGen Group maintained its Market Perform rating on Stitch Fix , Inc. (NASDAQ:) stock with a steady price target of $3.50. The firm’s outlook for the online personal styling service remains cautious due to anticipated growth being more than a year away.

According to the firm, the valuation of Stitch Fix is expected to be range-bound for the time being, as long-term growth prospects are still unclear in a competitive e-commerce retail landscape.

The analyst noted that while Stitch Fix could evolve into a profitable and stable enterprise, the total addressable market (TAM) for the company’s business model is still uncertain. This uncertainty is projected to persist for another year, with positive growth not forecasted until the fiscal year 2026 (FY26).

Despite improvements in operating metrics, this lack of clarity on long-term growth is likely to keep the stock’s valuation from breaking out of its current range.

Stitch Fix’s recent financial guidance indicated a decline in top-line growth by 16% for the fiscal year 2025 (FY25). This projection contributes to the firm’s stance of staying on the sidelines until there’s a clearer path to growth. The firm suggests that as the company approaches FY26 and if growth prospects improve, there could be potential upside for the stock’s valuation.

The firm’s commentary reflects a cautious optimism about the future, recognizing that Stitch Fix is making strides in its operations. However, the competitive nature of the e-commerce retail sector poses challenges that need to be navigated before any significant valuation changes can be expected for the company’s shares.

In conclusion, Bernstein SocGen Group’s reiteration of the Market Perform rating indicates that investors may not see considerable movement in Stitch Fix’s stock price until the company demonstrates a more definitive growth trajectory, which is currently projected to materialize in FY26.

In other recent news, Stitch Fix Inc. reported a wider than anticipated loss in its fiscal fourth quarter, with a loss of $0.29 per share, missing analyst estimates of a $0.20 per share loss. The company’s revenue also experienced a 12% year-over-year decline, totaling $319.6 million.

Despite this, the revenue figure slightly surpassed the consensus estimate of $318.48 million. Canaccord Genuity has adjusted its price target for Stitch Fix to $3.50, down from $4.50, while maintaining a hold rating on the stock.

This comes in light of Stitch Fix’s recent forecast for the first quarter of fiscal 2025, which fell short of analyst projections. The company anticipates revenue between $303 million and $310 million, compared to the expected $331.3 million. Furthermore, the company’s active client numbers declined by nearly 20% year-over-year, now standing at 2.51 million.

Despite these challenges, Stitch Fix is undertaking measures to revitalize its business, including updates to the client experience and a disciplined approach to expenses. These are the recent developments for Stitch Fix Inc.

InvestingPro Insights

Stitch Fix, Inc. (NASDAQ:SFIX) presents a mixed financial picture according to the latest data from InvestingPro. While the company holds more cash than debt, signaling a healthy balance sheet, analysts are concerned about its profitability. They do not anticipate Stitch Fix will be profitable this year, which aligns with the cautious stance of Bernstein SocGen Group. In fact, the company’s stock has seen considerable volatility, with a notable dip over the last week, yet it has experienced a significant price uptick over the last six months, indicating some investor optimism.

InvestingPro Tips highlight that three analysts have revised their earnings upwards for the upcoming period, suggesting potential improvements in Stitch Fix’s operations. However, the company is trading at a low revenue valuation multiple, with a P/E Ratio of -3.66 and a PEG Ratio of -0.07. The revenue for the last twelve months as of Q3 2024 stands at $1.43 billion, marking a decline of 16.44%, which supports the firm’s projections of a top-line growth decline.

For investors looking for deeper insights, there are additional tips available on InvestingPro. The platform provides a comprehensive analysis, including a fair value estimate of $5.51, which is higher than the current analyst target of $3.50. This discrepancy could indicate a potential undervaluation of the stock, offering a different perspective for investors considering Stitch Fix’s future prospects.

Ultimately, while the company’s near-term outlook remains uncertain, the InvestingPro data and tips provide valuable context for investors as they weigh their options with Stitch Fix. For those interested in exploring further, additional InvestingPro Tips are available to help make more informed investment decisions.

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