Please ensure Javascript is enabled for purposes of website accessibility

Why Stitch Fix Stock Popped This Morning

By Rich Smith - Apr 6, 2021 at 12:46PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Stitch Fix flubbed the pandemic. Will it do any better during the recovery?

What happened

Shares of online clothier Stitch Fix (SFIX 0.85%) jumped 9.1% in 11 a.m. EDT trading Tuesday -- and you can probably thank the friendly analysts at Evercore ISI for that.

So what

Yesterday after close of trading, you see, Evercore announced that it is initiating coverage of Stitch Fix with an "outperform" rating and a $78 price target -- quite a lot more than the $52 and change that Stitch Fix stock currently costs.

During the pandemic, a lot of investors probably considered Stitch Fix as a kind of "pandemic play," inasmuch as it facilitated shopping for clothes remotely, rather than in physical stores. And yet, as reports, Evercore thinks consumers' "closets need to be restocked" after a year of living in lockdown, and argues that now Stitch Fix is actually "a COVID recovery play" (emphasis added).

Arrow angles up on a green stock chart

Image source: Getty Images.

Now what

Personally, I don't understand the logic of that statement -- the "pandemic play" argument made more sense to me, even if it didn't end up working out in practice. Now it almost seems as if Evercore is casting about in search of an argument that "works" to defend buying unprofitable Stitch Fix.

Still, the analyst argues that if it's right, "FY21 and FY22 should both experience rev growth acceleration." Evercore therefore advises that investors take "advantage of recent 40% pullback" to buy Stitch Fix stock before this growth materializes.

As for me, I'd prefer to see Stitch Fix prove that it can earn a profit post-pandemic (after losing money in three of the past four pandemic quarters) before buying into this thesis.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

StitchFix Stock Quote
$8.30 (0.85%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/22/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.