POSH - Should you invest in Urban Outfitters shares as it launches an online thrift store?
On Tuesday, Urban Outfitters Inc. ( NASDAQ:URBN ) shares surged 5.44% after announcing plans to launch an online thrift store. The company said the store will launch on iPhone this fall under the name Nuuly Thrift. It puts it in direct competition with other online resellers like Poshmark Inc. ( NASDAQ:POSH ) whose shares surged 1.18% despite the news.
Customers will be allowed to list used products from any brand, whilst being able to transfer earnings directly to their bank accounts. Alternatively, they could choose to redeem it for Nuuly Cash.
David Hayne, president of Nuuly and Urban Outfitters’ chief technology officer said :
From a thrift standpoint, we know that if we don’t provide the platform it’s not going to keep sellers from selling on other platforms. These secondhand experiences are happening whether we’re playing in them or not.
Later in the day, Urban Outfitters announced its most recent quarterly results, beating analyst expectations on revenue and earnings.
Should you buy Urban Outfitters shares now?
In the company’s fiscal Q2 results, Urban Outfitters reported GAAP earnings per share of $1.28, beating analyst expectations by $0.51. On the other hand, revenue for the quarter grew by 44.4%to $1.16 billion, outperforming the consensus Street estimate by $80 million.
The URBN stock now trades at a P/E ratio of 19.79 and a forward P/E ratio of 13.85, making the stock attractive to value investors. However, analysts expect earnings to decline by about 99% this year before rising by just 4.97% next year. Therefore, growth investors may opt for alternatives in the market.
Therefore, with the URBN shares up more than 65% this year and over 95% over the last 12 months, it seems there is not much room left for more upward movement given the current EPS growth prospects. However, investors may buy the stock short term due to its exciting valuation.
Technical overview: Urban Outfitters stock price forecast for Q3 2021
Technically, Urban Outfitters shares seem to be trading in a highly volatile sideways channel formation in the intraday chart. However, the stock recently bounced off the trendline support, rallying closer to overbought conditions.
Therefore, investors can target pullbacks at approximately $38.83 or lower at $36.65. The key resistance levels are $42.16 and $44.01.
Bottom line: the case for targeting URBN stock price pullback
In summary, although Urban Outfitters shares seem substantially undervalued, the earnings growth prospects create a significant headwind. Moreover, the stock price spiked closer to overbought conditions, leaving little room for more upward movement.
Therefore, it may be best to wait for the stock price to pull back or short URBN shares to profit on the downside.
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