Shares in online personal styling service Stitch Fix (SFIX) sunk 7% in after-hours trading on Monday after the company posted disappointing earning results for the fiscal third quarter.
Specifically, Q3 GAAP EPS of -$0.33 missed Street expectations by $0.19 while revenue of $371.73M dropped 9.1% year-over-year, and fell $42.81M short of consensus estimates due to COVID-fulfillment challenges.
However active clients of 3.4M represented 9% year-over-year growth, and net revenue per active client also increased 6% year-over-year to $498.
The company did not provide FQ4 guide, though expects positive net revenue year-over-year adjusting for the extra week in FQ4:19, positive EBITDA (ex. SBC) and FCF, and 200-300 bps of Q/ Q Gross Margin expansion.
Following the results, RBC Capital analyst Mark Mahaney reiterated his SFIX buy rating while ramping up his price target from $23 to $27. “Q3 was a disappointment. That said, we believe looking past the severe supply disruption, there is a good fundamental story to look forward to” he explained.
Mahaney cited the company’s very large addressable market of ~100B, a resilient business model, a strong Direct Buy offering, and UK/Kids continuing to gain traction.
“At ~1x EV/S, we think Street expectations are muted, and with a differentiated, “subscription-like” model and the potential to achieve 20%+ Revenue growth, we are patiently sticking with our Outperform rating” he concluded.
Similarly, SunTrust Robinson analyst Youssef Squali believes the stock shows a compelling valuation relative to his $28 DCF-derived price target.
“We believe SFIX is back to operating from a position of strength post a weak Covid-induced F3Q20, with its throughput constraints largely behind it, resilient demand fueling a resumption of Y/Y growth in May, and F4Q20 guidance pointing to the same” he wrote, adding that Direct Buy could be transformational longer term.
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