On Wednesday, BofA Securities maintained a Buy rating on Urban Outfitters, Inc. (NASDAQ: NASDAQ:URBN), with a steady price target of $52.00 for the shares.
The firm highlighted the company's recent performance, noting that Urban Outfitters reported a significant earnings beat, driven by robust sales growth at its Anthropologie and Free People brands. However, the Urban brand itself showed continued weakness.
Urban Outfitters' gross margin (GM) improvements and the positive trends at the start of the quarter for the Urban brand, alongside sustained momentum at Anthropologie and Free People, were seen as encouraging signs.
Despite expressing some disappointment in the lower second-quarter GM guidance, BofA Securities believes that the planned clearance should set up Urban Outfitters for a stronger second half of the year.
The financial institution has increased its fiscal year 2025/2026 earnings per share (EPS) estimates by 2% and 1%, respectively, raising them to $3.61 and $4.15. This adjustment reflects the first-quarter earnings beat, where the company posted earnings of 69 cents per share compared to BofA's estimate of 48 cents.
BofA Securities reiterated its Buy rating on the basis of anticipated continued strength in Urban Outfitters' core brands. The firm also sees potential for further gross margin improvement opportunities.
The price objective of $52.00 remains anchored at 7 times the enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio.
InvestingPro Insights
As Urban Outfitters (NASDAQ: URBN) navigates the retail landscape with its diverse brand portfolio, real-time data from InvestingPro provides a snapshot of its financial health. The company's market capitalization stands at $3.85 billion, with a P/E ratio of 13.37, which is considered low relative to its near-term earnings growth. This aligns with the recent earnings beat and BofA Securities' optimistic outlook. Furthermore, Urban Outfitters has demonstrated a strong revenue growth of 7.47% over the last twelve months as of Q4 2024, highlighting its ability to expand in a competitive market.
InvestingPro Tips indicate that Urban Outfitters has been profitable over the last twelve months, with a high return over the last year, showcasing a 52.81% one-year price total return as of the current date. Additionally, analysts predict the company will remain profitable this year, supporting BofA Securities' raised EPS estimates for fiscal years 2025 and 2026. Despite not paying a dividend, the company's stock price has seen a large uptick over the last six months, with a 29.86% six-month price total return, which may interest growth-focused investors.
For those looking to delve deeper into Urban Outfitters' financials and stock performance, InvestingPro offers further insights and metrics. With an additional 9 InvestingPro Tips available, investors can make more informed decisions by visiting https://www.investing.com/pro/URBN. To access the full range of features, including comprehensive analytics and exclusive data, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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