Wednesday, Baird raised the price target on shares of Urban Outfitters, Inc. (NASDAQ: URBN) to $49.00 from $47.00, while keeping a Neutral rating on the stock.
The firm's decision followed Urban Outfitters' earnings report, which surpassed consensus expectations by approximately 27%, mainly due to a higher gross margin. The company has seen an acceleration in gross margin beats throughout the year.
The report from Baird highlighted that Urban Outfitters experienced a solid demand trend recovery after an initial hiccup early in the third fiscal quarter. This resilience comes despite numerous external market fluctuations. Management at Urban Outfitters expressed confidence in the company's positioning as it heads into the holiday season, anticipating stable to improved comparable store sales.
In response to the earnings beat, Baird adjusted its financial estimates for Urban Outfitters, increasing projections by 5% and 6% for fiscal years 2025 and 2026, respectively. Most of the revisions are attributed to the positive flow-through from the third fiscal quarter's performance.
The analyst pointed out that Urban Outfitters' valuation appears reasonable, trading at approximately 11 times earnings per share and less than 8 times excluding cash. However, given that this valuation is close to the multi-year average, the firm advised investors to exercise discipline.
Baird suggests that while it would be prudent to consider buying shares near or below $40, they would be hesitant to pursue the stock beyond the mid-to-upper $40s in the near term.
In other recent news, Urban Outfitters Inc (NASDAQ:URBN). reported a strong third quarter for fiscal year 2025, with total sales climbing 6% to $1.4 billion and net income rising 24% to $103 million. The company's gross profit also saw a significant increase of 9%, improving the gross profit rate to 36.5%.
Following these results, Telsey Advisory Group adjusted their price target for Urban Outfitters, increasing it to $46 from the previous $44, while maintaining its Market Perform rating. Similarly, Citi upgraded shares of Urban Outfitters from Neutral to Buy, setting a new price target at $59.
The company's rental service, Nuuly, experienced a 48% revenue increase and a 50% growth in its subscriber base. However, the Urban Outfitters brand reported a 9% decline in its retail segment.
Moreover, Urban Outfitters revealed plans to open approximately 58 new stores while closing 31 in fiscal 2025. Despite the challenges faced by the Urban Outfitters brand, the company's other brands, Anthropologie and Free People, maintain solid positions. These recent developments have bolstered confidence in the company's ability to achieve mid-single-digit sales growth in Fiscal Year 2025.
InvestingPro Insights
Urban Outfitters' recent performance aligns with several InvestingPro insights. The company's P/E ratio of 11.87 supports Baird's valuation assessment, indicating that URBN is trading at a low P/E ratio relative to its near-term earnings growth. This is further emphasized by the PEG ratio of 0.34, suggesting the stock may be undervalued considering its growth prospects.
The company's strong financial health is evident from InvestingPro data, showing that cash flows can sufficiently cover interest payments and liquid assets exceed short-term obligations. This solid financial footing may contribute to Urban Outfitters' confidence heading into the holiday season.
InvestingPro Tips highlight that URBN has seen significant returns over the last week (8.75%) and month (14.13%), which could reflect the market's positive reaction to the earnings beat and improved outlook. Additionally, analysts predict the company will remain profitable this year, aligning with Baird's increased projections for fiscal years 2025 and 2026.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for URBN, providing deeper insights into the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.