Stifel Analyst: Stitch Fix Drop Presents Good Buying Opportunity

The company’s shares are up 58% year to date.

Shares of Stitch Fix rose 4% on Monday after Stifel upgraded the company from hold to buy and maintained its $38 price target. Previously, the stock was down 16% but according to analyst Scott Devitt, this simply presents a good buying opportunity.

The past year has been full of ups and downs for the company. The stock is up 58% year to date but still down 21% from a year earlier. The shares have risen as high as $52.44 and fallen as low as $16.05. 

Is Stitch Fix a good buying opportunity?

Earlier this month, the company’s shares rose 10% after being upgraded by Goldman Sachs. But by the end of the day, the stock had lost all of these gains and then some. 

Will the boost the company received from the Stifel rating stick? Only time will tell but here are a couple of things to consider before investing in Stitch Fix.

Stitch Fix is working on improving its customer personalization

Stitch Fix has seen its active-user growth slow in recent months but is looking for ways to turn this around. One way the company plans to do this is by offering increased personalization options to its customers.

In an effort to attract more high end customers, Stitch Fix now offers a Style Shuffle option. Customers can rate a variety of styles and outfits, which helps Stitch Fix better understand that customer’s style and create better Fixes for them in their monthly boxes.

And the company recently indicated that it may take a page from some of its competitors and begin offering customers the option to rent clothes instead of buying them. Rent the Runway has had a lot of success by employing this model.

Stitch Fix is still in its early growth stages

In general, analysts are pretty divided when it comes to Stitch Fix. Out of 11 analysts, most have given the company a hold rating with just four giving it a buy rating. 

But those that see the company’s potential argue that Stitch Fix is still it its early stages of growth and have a lot more opportunity to expand in the future. CFO Paul Yee expressed this sentiment when he said the company was in its “second inning at best.”

The company estimates a growth rate around 20% through 2022 which is pretty on target with Stifel’s 19% estimate. And the company has strong tailwinds that could make this happen.