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Stitch Fix (SFIX) Moves 14.1% Higher: Will This Strength Last?

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Stitch Fix (SFIX) shares rallied 14.1% in the last trading session to close at $66.10. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 46% gain over the past four weeks.

Stitch Fix’s shares got a boost as the company came out with impressive third-quarter fiscal 2021 results, wherein both top and bottom lines improved year over year and came ahead of the respective Zacks Consensus Estimate. To top it, management raised its net revenue guidance for fiscal 2021. For fiscal 2021, management now projects net revenues in a band of $2.07-$2.08 billion, indicating 20.9-21.5% growth from the year-ago period. Earlier, the company projected net revenues of $2.02-$2.05 billion, suggesting an increase of 18-20% from the year-earlier period.

During the third quarter, the company witnessed solid demand for its Fix offering from first-time as well as reactivated clients. Further, Stitch Fix saw better success rates across the Women’s, Men’s and Kids categories on a year-over-year and sequential basis. The company on its third-quarter earnings call stated that it is witnessing a revival in apparel demand, as consumers have started to move out with coronavirus-related curbs being lifted and vaccination drive gathering pace. Stitch Fix continued rolling out new product features in the third quarter in order to improve offerings as well as boost client adoption. The new clients fueled momentum in the third quarter, which is expected to continue in the fourth quarter as well. For the fourth quarter of fiscal 2021, Stitch Fix expects net revenues of $540-$550 million, which suggests year-over-year growth of 21.8-24%.

In third-quarter fiscal 2021, Stitch Fix’s loss of 18 cents per share came in narrower than the Zacks Consensus Estimate of a loss of 27 cents. The company reported a loss of 33 cents in the prior-year quarter. Net revenues of $535.6 million surged 44% year over year and surpassed the Zacks Consensus Estimate of $511 million.

This online clothing styling service is expected to post quarterly loss of $0.21 per share in its upcoming report, which represents a year-over-year change of +52.3%. Revenues are expected to be $536.37 million, up 21% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Stitch Fix, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on SFIX going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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