Friday - Baird has increased the price target for Urban Outfitters, Inc. (NASDAQ:URBN) shares to $55.00, up from the previous $49.00, while keeping a Neutral rating on the stock.
The firm's analyst noted the positive performance of the FP/Anthro brands, which saw an acceleration through the third fiscal quarter (FQ3) that surpassed expectations despite earlier volatility. The momentum is reportedly continuing into the early holiday shopping period.
According to the analyst, management's guidance suggests approximately stable low single-digit percentage retail comp trends heading into the fourth fiscal quarter (FQ4). This leaves room for some deceleration at FP, considering the strong growth it experienced in the previous year.
The analyst believes this range is achievable and could lead to a potential positive guidance update during management's presentation at the ICR Conference in January.
The Urban Outfitters (UO) brand is in the process of stabilizing its top-line revenue. A year-over-year decline in markdowns during FQ3 is seen as a positive step towards bringing brand margins back to breakeven. The analyst suggests that progress in the brand's turnaround could act as a catalyst for the company's shares in 2025.
Baird highlighted several factors contributing to a more favorable view of Urban Outfitters' stock. These include the resilient momentum of the FP/Anthro brands in a challenging consumer macro environment, contributions from the Nuuly platform, potential upside at UO, and a strong balance sheet with $8 per share in cash at the end of FQ3.
This financial position provides Urban Outfitters with significant resources for potential buybacks. Despite these positive factors, the firm is looking for more significant signs of improvement at the UO brand before adopting a more bullish stance.
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