Citi maintains Buy on Urban Outfitters stock, target at $59

On Wednesday, Citi analyst Paul Lejuez confirmed a Buy rating on Urban Outfitters, Inc. (NASDAQ:URBN), a $5.3 billion specialty retailer, with a steady price target of $59.00. The optimism appears well-founded, as InvestingPro data shows eight analysts have recently revised their earnings expectations upward. Lejuez anticipates a slight outperformance in the company’s fourth-quarter earnings per share (EPS), which are set to be released after market close on February 26. This expectation is based on a projected gross margin (GM) that surpasses the consensus, while sales are predicted to align with expectations. The company’s current gross margin stands at 34.2%, according to InvestingPro data, which shows the company maintains healthy profitability metrics and operates with moderate debt levels. This projection follows the company’s prior announcement of holiday sales figures at the ICR Conference in early January.

Lejuez suggests that investors are likely to concentrate on the progress of the Urban Outfitters brand and its contribution to the overall company margin growth for Fiscal Year 2025 (F25). Strong holiday sales reported by Urban Outfitters’ Anthropologie and Free People brands reinforce the analyst’s opinion that both could achieve low to mid-single-digit comparable store sales (comps) in F25.

The analyst expects management to provide first-quarter and full-year F25 EPS guidance that aligns with consensus. However, he also identifies potential factors that could lead to performance exceeding F25 expectations, such as a quicker rebound in Urban Outfitters’ comps and margins, along with stronger Anthropologie and Free People comps. These elements underpin Citi’s positive stance on Urban Outfitters stock.

Despite this optimism, Lejuez notes that the market has already priced in the strong holiday performance, with the possibility of comps slowing down after the holiday season during the current "retail lull" period. The stock’s impressive 39.4% gain over the past six months reflects this strong performance, though InvestingPro analysis suggests the stock is currently trading slightly above its Fair Value. With a P/E ratio of 16.0 and a favorable PEG ratio of 0.76, the analyst sees a balanced risk/reward scenario as the fourth-quarter EPS approaches. For deeper insights into URBN’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

In other recent news, Urban Outfitters has reported a series of financial developments. The company disclosed its sales performance for the holiday season and the eleven-month period ending December 31, 2024, indicating a 10% increase in total company net sales. This growth was attributed to a 7% rise in total Retail segment net sales, with comparable Retail segment net sales up by 6%.

The company also reported its earnings for the three and nine months ended October 31, 2024, providing investors with the latest financial performance data. Jefferies and Baird, two financial services firms, have revised their outlook for Urban Outfitters based on these developments. Jefferies analyst Corey Tarlowe raised the price target for Urban Outfitters to $40.00 from the previous $36.00, while Baird increased the price target to $55.00 from the previous $49.00. Both firms maintained their existing ratings on the stock.

Urban Outfitters’ FP Movement brand was highlighted as a positive performer, contributing to the company’s favorable outlook. These recent developments reflect the company’s current performance and market position.

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