2023-06-07 14:28:29 ET
Stitch Fix’s ( NASDAQ: SFIX ) long term strategy is still attracting scrutiny from sell-side analysts, even as the stock surges over 30% on Wednesday.
The sell-side largely remained on the sidelines following the fiscal third quarter print, which featured a lighter than expected loss and updates on cost-cutting efforts . The common refrain among analysts was that while the report was encouraging, questions remain on reaching profitability and returning to growth.
“Cost cutting initiatives a good step toward profitability, but topline remains the issue,” Wells Fargo analyst Ike Boruchow told analysts. “SFIX has seen a declining user base for the last six Qs, & guidance implies this trend will persist. While SFIX is taking the necessary steps to improve profitability, notably reducing headcount & closing numerous DCs, negative topline trends need to stabilize to change the story.”
As such, he remained on the sidelines. Analysts at Morgan Stanley, UBS, and Bernstein each separately agreed that the bull/bear debate remains unsettled despite the progress shown in the quarterly print.
“Overall we like the direction the business is going and it feels like they are making the
right [long-term] decisions to go back to the core of the business model. We aren't out of the woods yet, but we can see the pathway to stability and eventually profitability,” Bernstein analyst Aneesa Sherman wrote in one of the more optimistic reviews of the results. We will look for more signs of progress in Q4 and FY24 guide.”
The consensus sell-side rating remains a Hold. Seeking Alpha’s Quant team recently upgraded the stock ahead of its Q3 results.
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Stitch Fix still arouses skepticism on the Street despite 30%+ post-earnings pop