Morgan Stanley (NYSE:MS) has adjusted its outlook on Urban Outfitters, Inc. (NASDAQ: NASDAQ:URBN), reducing the price target to $38 from the previous $40 while retaining an Equalweight rating on the stock.
The adjustment follows the company's second-quarter performance, which, despite positive headlines, was marred by a less impressive composition and a decelerating quarter-to-date trend. This resulted in an after-market close (AMC) stock decline of 8%.
The analysis by Morgan Stanley acknowledges the normalization of performance at Anthropologie and Free People, two of Urban Outfitters' brands, while suggesting the Urban Outfitters brand itself may face ongoing challenges. The firm indicates that while Urban Outfitters had previously shown potential as a "goldilocks" stock, such prospects now appear to be diminishing.
The firm also pointed out concerns about potential excess inventory that could impact Urban Outfitters' performance. Despite these issues, Morgan Stanley believes that the stock is likely to remain range-bound. The outlook is supported by the stock's relatively low valuation and the potential for upside in the third quarter and the full fiscal year.
In other recent news, Urban reported strong second-quarter results with earnings per share of $1.24, surpassing the consensus estimate of $1.00, and a revenue rise of 6.3% year-on-year to $1.35 billion. This was driven by strength across all three segments - Retail, Nuuly, and Wholesale. However, the company's brands - Anthropologie, Free People, and Urban Outfitters - experienced a slight shortfall in same-store sales. JPMorgan (NYSE:JPM), Jefferies, and Citi have all revised their outlook on Urban Outfitters, adjusting their price targets and maintaining various ratings on the company's stock.
InvestingPro Insights
Urban Outfitters, Inc. (NASDAQ: URBN) is currently navigating a complex market environment, as reflected in recent analyst revisions and stock performance. According to InvestingPro data, Urban Outfitters boasts a market capitalization of $3.87 billion, with a P/E ratio of 12.93, which adjusts to 12.41 for the last twelve months as of Q1 2025. This valuation metric suggests the stock is trading at a low price relative to its near-term earnings growth, as indicated by a PEG ratio of just 0.2 for the same period. The company's revenue growth remains positive, with a 7.89% increase over the last twelve months as of Q1 2025, and its gross profit margin stands at a healthy 33.76%.
InvestingPro Tips highlight that while analysts have revised their earnings estimates downwards for the upcoming period, they also predict Urban Outfitters will remain profitable this year, having been profitable over the last twelve months. The company's cash flows are sufficient to cover interest payments, and it operates with a moderate level of debt. Despite not paying dividends, Urban Outfitters' stock price movements are noted to be quite volatile, which could be a consideration for investors seeking stability.
For investors looking for a deeper dive into Urban Outfitters' financial health and stock potential, InvestingPro offers additional insights. Currently, there are over 5 more InvestingPro Tips available at https://www.investing.com/pro/URBN, providing a more comprehensive view on whether URBN's current market position aligns with their investment strategy.
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