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Author: Alan LittleDate: 2021-09-23

Stitch Fix (SFIX) +16% after rallying to surprise Q4 profit

Online styling service Stitch Fix (SFIX) made notable gains on Wednesday after swinging to a profit of 19 cents per share following a “strong performance” in Q4.

Stitch Fix (SFIX) shares soared 16% in Wednesday’s trading after the online styling service surprised investors with a quarterly profit and very healthy sales in Q4.

For the three weeks to 31st July, Stitch Fix rallied from a $0.48 per share loss a year ago to earnings of $0.19 per share amid “strong performance” across key segments in both the US and UK.

Net sales jumped 29% to $571m as overall revenue hit $2.1bn, the latter figure being a marked improvement from the $1.7bn back in 2020.

Both earnings and sales easily surpassed the Wall Street consensus, and markets reacted positively as SFIX climbed by mid-afternoon on the Nasdaq.

Not everyone was fully on board though, as Wells Fargo reiterated an underweight rating on what it views as a middling long-term outlook.

Stitch Fix said in midweek that revenue could hit a ceiling of $575m in fiscal Q1 and that top line would grow by +15% for the next full year.

Analyst Ike Boruchow said that Wells Fargo “appreciates the improvement, but the story remains challenged”.

Standing pat on a $35 price target, Boruchow said that conservative fiscal 2022 revenue guidance, a larger inventory, and investments that will affect cash flow were the reasons behind its reticence.

Stifel analysts, who cut their rating by $24 to $46, also believe that the “greater investment spend” could be an issue and that it was lowering top-line estimates as a consequence.

Truist analysts were more upbeat after continuing with a buy rating, though they did shave $17 off a new, lower $60 price target.

Despite the muted reaction, Stitch Fix shares advanced 16.47% to $41.30 by mid-afternoon on Wednesday.

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