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Wells Fargo: Buy Urban Outfitters Stock Because It Has 'Regained Momentum'

Wells Fargo: Buy Urban Outfitters Stock Because It Has 'Regained Momentum'

David Tonelson | Dreamstime.com

By    |   Tuesday, 01 October 2019 09:53 AM

Wells Fargo reportedly upgraded Urban Outfitters stock, urging investors to buy shares because the clothing retailer has “regained momentum.”

Wells Fargo analyst Ike Boruchow raised his rating on Urban to Outperform from Market Perform and added $5 to his price target, to $30, Barron’s reported.

He writes that he was impressed by senior management presentations at last week’s Wells Fargo Consumer Conference and Beauty Forum, which highlighted Urban Outfitters’ efforts to make changes at the company after several weak quarters.

“We believe Urban Outfitters may have regained momentum, as there is no shortage of strong fashion trends to latch on to,” the analyst writes. “We believe the possibility of positive comparable sales and flattish gross margins in the fourth quarter are squarely on the table—presenting meaningful upside to numbers.”

“Of course, Urban Outfitters still faces obstacles. As Barron’s has noted before — and Forever 21’s recent bankruptcy filing bears out — there is still a lot of excess retail in the U.S.,” Barron’s explained.

Fast-fashion retailer Forever 21 filed for bankruptcy late on Sunday, joining a growing list of brick-and-mortar companies that have seen sales hit by the rise of competition from online sellers like Amazon.com Inc. and the changing fashion trends dictated by millennial shoppers, Reuters explained.

“Stores like Urban Outfitters must not only face the age-old challenge of staying on top of trends, but now also must deal with declining mall traffic and the rise of online rivals. While a successful turnaround isn’t impossible, the company operates in an industry that is undergoing a major shift, and will want to make as much progress as possible while consumer confidence remains high.”

Urban Outfitters stock (URBN) was up about 1% at $28.43 in early trading. 

To be sure, Forever 21 Inc., the privately held company that helped popularize trendy and cheap clothing, has fallen out of favor with shoppers, in part due to other retailers like Sweden’ H&M and Spain’s Zara that churn out affordable styles similar to those recently seen on designer runways.

Younger, more environmentally conscious shoppers are also choosing brands that ethically source garments instead of retailers that use cheap fabrics to make T-shirts that are snapped up for $5. Resale sites like thredUp.com, which calls itself the largest online thrift store, are also growing in popularity.

Since the start of 2017, more than 20 U.S. retailers including Sears Holdings Corp and Toys ‘R’ Us have filed for bankruptcy as more customers shop online and eschew large malls.

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Wells Fargo reportedly upgraded Urban Outfitters stock, urging investors to buy shares because the clothing retailer has “regained momentum.”
wells fargo, urban outfitters, stock, shares
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2019-53-01
Tuesday, 01 October 2019 09:53 AM
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