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Why Stitch Fix Stock Surged over 25% on March 12

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Stitch Fix beat Wall Street estimates on all counts

Online retail and personal styling service company Stitch Fix (SFIX) announced its results for the first quarter of fiscal 2019 (which ended on January 26, 2019) on March 11.

The company reported stellar numbers, beating Wall Street analysts’ estimates in terms of active users, revenue, and earnings. This outperformance caused its stock to soar over 25% on March 12.

During the quarter, Stitch Fix generated revenue of $370.3 million, up 25% from the same quarter last year, topping Wall Street’s consensus estimate of $365 million.

Stitch Fix posted a net income of $11.9 million, or $0.12 per share, easily beating analysts’ estimate of $0.05 per share.

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Stitch Fix’s active base grew 18% year-over-year

Meanwhile, the company’s user base rose 18% year-over-year to 2.96 million, slightly higher than Wall Street’s estimate of 2.95 million active clients.

Investors are more interested in Stitch Fix’s subscriber base growth than its top line or bottom line growth. An Internet company’s user base is a gauge of its future earnings.

The surge in Stitch Fix stock was also the result of strong forecasts for the rest of the year. Stitch Fix expects its fiscal 2019 third-quarter revenue to be between $388 million and $398 million, beating Wall Street’s consensus estimate of $384 million.

The company expects revenue of between $1.53 billion and $1.56 billion in fiscal 2019, higher than analysts’ consensus estimate of $1.51 billion.

While the stock jumped 25% on March 12, it fell over 6% in the first hour of trading on March 13. The stock has doubled since its debut in late 2017.

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