While Urban Outfitters’ [URBN] share price has recovered somewhat since its slump in April, the stock has spent most of this year in the red. It has, for most of the year, failed to regain the price at which it opened 2020 — until recently that is. On its worst day of trading so far this year, Urban Outfitters’ share price registered a 54% year-to-date drop to close at $12.77 on 3 April.
As of 20 November’s close, Urban Outfitters’ share price is up 8.93% after closing at $30.32. This rally also marks the first time since February that the stock closed above its 2020 opening value. As the company prepares to reveal its third-quarter results, due 23 November, can investors expect the upward trend in Urban Outfitters’ share price to continue?
How has Urban Outfitters been performing?
Urban Outfitters’ share price soared following the release of its second-quarter earnings on 25 August. The retailer announced earnings of $0.35 per share, which beat the expected loss of $0.33 per share by a whopping 206.1%. Over the last four quarters, this was the first time that Urban Outfitters surpassed consensus earnings estimates.
For the quarter ending July, the company reported revenues of $803.27m — 18.15% above the consensus estimate from Zacks Equity Research. Despite the beat, revenues were down 16.5% from the $962.33m the company reportedly made a year previously. This also marked Urban Outfitters’ only positive revenue surprise over the last four quarters.
Urban Outfitters' Q2 revenue - a 16.5% YoY drop
The positive earnings were attributed to strong digital sales, which helped to outweigh some of the losses accrued by the closure of physical stores as a result of the coronavirus pandemic. The earnings call helped to push Urban Outfitters’ share price up 12.6% during after-hours trading on 25 August.
“I’m pleased to announce URBN produced solid revenues and profits for the second quarter driven by strength in the digital channel,” said Richard Hayne, CEO of Urban Outfitters. “Notably, all brands were profitable and enter the fall selling season with lean inventories and positive momentum.”
“I’m pleased to announce URBN produced solid revenues and profits for the second quarter driven by strength in the digital channel. Notably, all brands were profitable and enter the fall selling season with lean inventories and positive momentum” - Richard Hayne, CEO of Urban Outfitters
Looking ahead, Wall Street expects the fashion retailer to post quarterly earnings of $0.45 per share, which would represent a decline of 19.6% year-over-year. For revenue, Urban Outfitters is expected to have made $929.53m for the quarter, which would represent a decline of 5.9% from the same quarter last year.
For the full year, Zacks expects Urban Outfitters to produce earnings per share of -$0.14 and revenues of $3.47bn, These would mark respective declines of 108.4% and 12.8% from last year.
What the analysts think
Ike Boruchow, analyst at Wells Fargo, downgraded the stock to Equal Weight from Overweight, with a target of $28 on Urban Outfitters’ share price. Following its recent surge on vaccine news, Urban Outfitters had outperformed Boruchow’s group, The Fly reported.
Boruchow suggested that the company’s e-commerce penetration had helped them hold throughout the pandemic and allowed Urban Outfitters’ share price to more than double from its low-point earlier in the year, the publication noted. However, he also suggested that there may be some better ways to play any recovery, despite possible tailwinds for Urban Outfitters.
Among 21 analysts polled by CNN Money, the consensus is to Hold the stock. This comes from a majority of 16, while the remaining five have given the stock a Buy rating.
Meanwhile, among the 17 analysts offering 12-month forecasts on CNN Money, there is a median price target of $25, with a high estimate of $33 and a low of $19. The median estimate would represent a 17.5% decrease from Urban Outfitters’ share price as of close on 20 November.
|Operating Margin (TTM)||0.78%|
|Quarterly Revenue Growth (YoY)||-16.5%|
Urban Outfitters share price vitals, Yahoo Finance, 23 November 2020