There wasn't any specific news to explain the share price drop last month. The stock is up 60% since its IPO in 2017, but the shares have traded in a flat range over the last two years.
One reason for the flattish stock performance is its high valuation. The price-to-earnings ratio is 94, which assumes a high rate of future earnings growth. However, Stitch Fix reported a small net loss in the most recent quarter, which was a reversal of the year-ago net profit of $10.7 million.
Management blamed increased investments in marketing, talent, and expansion in the U.K. for the earnings shortfall.
In late January, one analyst upgraded the stock to a buy rating citing a few catalysts on the horizon. The analyst expects the company's initiatives in direct buying to improve engagement and grow revenue. The direct-buy option allows customers to buy merchandise outside of their normal Fix, and management expects this capability to stretch their long-term growth opportunity. New direct-buy offerings -- Shop Your Looks and Shop New Colors -- have been well received by customers so far.
Stitch Fix expects fiscal 2020 revenue to grow between 20.5% to 22.5% to reach $1.9 billion to $1.93 billion. Adjusted EBITDA is expected in the range of $93 million to $107 million.