Earnings Preview: Stitch Fix

After U.S. markets closed on Thursday, Adobe beat consensus earnings per share (EPS) and revenue estimates. Fourth-quarter EPS guidance was slightly above the consensus, while revenue guidance was in line with estimates. While the company’s results were outstanding, there are questions about future growth. The stock trades within 10% of its median price target, and it may be fully valued at the level. Shares traded down about 4% shortly after Friday’s opening bell.

Lennar also beat consensus estimates on both the top and bottom lines. Gross margin on home sales was about five percentage points below the same period of last year, and revenues were also down 2.3%. Orders for new houses are up 37%, and the dollar value of those orders is up 30% year over year. This leads to a wait-and-see attitude among investors. The stock traded down 4.5% early Friday.

Here is a look at what to expect from Stitch Fix Inc. (NASDAQ: SFIX), the one notable company scheduled to report quarterly results after U.S. markets close on Monday. No notable results are due out Tuesday morning.

This online apparel retailer has seen its stock price drop by about 32% over the past 12 months. Since posting a 52-week high in early February, the shares fell by nearly 50% in mid-May before bouncing higher and finally settling with a dip of around 40% from the February high.

Stitch Fix hired a new chief executive officer, Matt Baer, a Macy’s executive who came on board in late June. The big swings in Stitch Fix’s share price begin when investors believe that the stock is undervalued and last until investors believe that they have had enough excitement. Stitch Fix expects to have completed its exit from its U.K. business by the end of October. Rising costs and a weak macroeconomic environment get the blame.

Analysts remain cool to the stock. Of 16 brokerages covering the shares, 14 have a Hold rating and none rates it at Buy. At a recent share price of around $3.40, the potential upside based on a median price target of $4.55 is 33.8%. At the high target of $5.00, the upside potential is 47.1%.

Fiscal fourth-quarter revenue is forecast at $371.98 million, which would be down 5.8% sequentially and by almost 23% year over year. Stitch Fix is expected to post an adjusted per-share loss of $0.21, compared to a loss of $0.17 in the prior quarter and a loss per share of $0.89 a year ago. For the full fiscal year that ended in July, the adjusted net loss is forecast at $1.26, better than last year’s loss of $1.90 per share. Full-year revenue is forecast at $1.63 billion, down about 21.2% compared to the prior year.

Stitch Fix is not expected to post a profit in 2023, 2024 or 2025. The enterprise value to sales multiple in each of those years is 0.2. The stock’s 52-week trading range is $2.63 to $6.03. Stitch Fix does not pay a dividend, and the total shareholder return for the past year is negative 31.73%.

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