What happened
Shares of Abercrombie & Fitch (ANF 5.74%) are up 10% this week as of 3:30 p.m. ET Friday, according to data provided by S&P Global Market Intelligence, after a notable analyst upgraded shares of the clothing retailer.
So what
In a note to clients Tuesday, Jefferies analyst Corey Tarlowe reiterated the firm's buy rating and $65-per-share price target on Abercrombie & Fitch stock. Shares are trading around $60 as of this writing. Tarlowe detailed a meeting in which Abercrombie & Fitch management highlighted the ongoing turnaround of their Hollister business, while simultaneously pointing to the strength of Abercrombie's women's business as a leading indicator of impending improvements on the men's segment.
"We believe the market underestimates the impact of occupancy reductions on ANF's go-forward operating results," Tarlowe said, adding that the company's margin performance has been stronger than anticipated of late.
Now what
To be sure, Abercrombie shares previously skyrocketed in late August after the company's latest quarterly results hit the wires. Revenue last quarter climbed 16%, leading to operating margin of 9.6% -- with both figures handily outpacing guidance for 1% to 3% revenue growth and operating margin of only 4% to 5% for the year.
Abercrombie & Fitch stock is now up 155% year to date as of this writing, as the market obviously underestimated the strength of its underlying business. But if the note from Jefferies this week is on point, the apparel retailer's positive momentum could be set to continue for some time.
