The majority of analysts retain a “hold” rating
After the company’s stellar first-quarter results, of the 16 analysts covering Abercrombie & Fitch (ANF) stock, 44% retained a “hold” rating as of June 4. Another 25% rated it as a “buy,” while the remaining 31% of analysts rated the stock a “sell.”
The majority of analysts also rate American Eagle Outfitters (AEO), Urban Outfitters (URBN), and Gap (GPS) as a “hold.” For American Eagle Outfitters stock, 53% of the 19 analysts have recommended a “hold,” while for Gap, 76% of the 25 analysts covering the stock have recommended a “hold.” Urban Outfitters (URBN) is rated a “hold” by 55% of the analysts covering the stock.
Target price changes
Despite the stellar first-quarter results, there has been just one target price revision. We expect there could be more changes to come in the following days. On June 4, B. Riley raised the price target on ANF stock to $25.00 from the $24.00 projected earlier.
Currently, analysts’ target price for Abercrombie & Fitch is $22.58, reflecting a 6.1% downside to the stock price as of June 4. In comparison, analysts’ target price for American Eagle Outfitters is $22.67, reflecting a 3.7% downside to the stock price as of June 4. Gap’s mean target price is $32.78, which indicates a 12.3% upside to its stock price as of June 4. Urban Outfitters’ target price is $43.33, implying a ~2.0% downside to its stock price as of June 4.
Strong Hollister brand sales, international operations, expense leverage, and D2C (direct-to-customer) sales drove Abercrombie & Fitch’s first-quarter results. The company exceeded expectations on both the top and bottom lines. Also, on a YoY basis, the company reported sales growth of 11% and comps growth of 5%.
Forward PE (price-to-earnings) multiples are one of the most used metrics for making investment decisions. Forward PE is calculated by dividing stock prices by analysts’ earnings estimates for the next four quarters.
As of June 4, Abercrombie & Fitch was trading at a 12-month forward PE ratio of 26.1x. Since its fiscal first-quarter 2018 results release on June 1, its valuation multiple has increased 4.8%. Abercrombie & Fitch was trading at a higher valuation multiple than American Eagle Outfitters, Urban Outfitters, and Gap, which were trading at 15.5x, 11.2x, and 17.6x, respectively.