URBN - Urban Outfitters stock could climb another 25%: Morgan Stanley

2023-06-13 17:20:00 ET

Urban Outfitters Inc ( NASDAQ: URBN ) is already up more than 35% for the year but a Morgan Stanley analyst says the stock is not done pleasing its investors just yet.

Urban Outfitters stock has upside to $41

On Tuesday, Alex Straton lifted her rating on the lifestyle retailer to “overweight”. She now sees upside in “URBN” to $41 that suggests a 25% upside from here.

The analyst is constructive on Urban Outfitters stock as it’s attractively valued ahead of an inflection point. Her research note reads:

We upgrade now as we want to be ahead of that inflection and think the low relative valuation and outsized EBIT margin expansion potential versus peers presents opportunity.

Last month, the Nasdaq-listed firm reported its financial results for the first quarter that handily topped Street estimates.

What else could help Urban Outfitters?

Alex Straton likes Urban Outfitters stock as she’s convinced that earnings estimates are overly conservative for 2023.

Decline in promotions and easing comps were among other reasons she cited for her bullish view. The Morgan Stanley analyst sees significant improvement ahead in the company’s Anthropologie brand in particular.

Data suggests the UO assortment correction is working and could lift underlying sales growth back towards prior levels in the coming quarter (+LSD vs -1% underlying currently).

In the fall, Straton expects the back-to-school season to help this retail stock as well. On the flip side, she downgraded Capri Holdings to “equal weight” on Tuesday. CPRI is already down nearly 50% versus its year-to-date high.

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