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Why Stitch Fix, Inc. Stock Popped Thursday

By Daniel Sparks – Sep 13, 2018 at 6:12PM

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This stock's hot streak just got hotter. Here's what you should know.

What happened

Shares of Stitch Fix (SFIX 5.09%), a personalized online apparel business, moved higher on Thursday. The stock rose as much as 10.7%, but ended the trading day up 9.9%.

The stock's rise follows bullish commentary, as well as a price target increase, from KeyBanc Capital Markets analyst Edward Yruma.

A Stitch Fix box on a doorstep

Image source: Stitch Fix.

So what

"We are increasingly confident in management's ability to grow market share at a healthy margin, especially among [Stitch Fix's] newer categories," said Yruma in a note to investors this week (via Barron's). Yruma raised his price target on the stock from $33 to $53. Shares are currently trading at $48.84.

To support his higher price target, Yruma raised his outlook for the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) through 2020. By 2020, Yruma forecasts Sitch Fix can achieve EBITDA close to $95 million. Yruma also cited a healthy consumer environment as a catalyst.

Shares are up about 90% year to date.

Now what

Stitch Fix's stock has soared recently, rising 45% in June on the heels of the company's better-than-expected fiscal third-quarter results. Strong momentum during the quarter, including a 30% year-over-year increase in active clients and a 29% jump in revenue, prompted management to raise its outlook for its full-year results. 

Management expects revenue for the full year to rise 25% to 26% compared to fiscal 2017. 

The company reports its results for its fiscal fourth quarter on Oct. 1.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Stitch Fix. The Motley Fool has a disclosure policy.

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