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TSLA   421.94 (-2.06%)
NVDA   545.82 (+1.09%)
BABA   309.81 (+1.48%)
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QQQ   284.41 (+0.21%)
AAPL   117.51 (+1.32%)
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FB   267.56 (+2.36%)
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TSLA   421.94 (-2.06%)
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BABA   309.81 (+1.48%)
CGC   18.88 (-4.69%)
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MU   53.53 (+1.71%)
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ACB   4.56 (-3.18%)
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Stitch Fix (NASDAQ: SFIX) Stock Gearing Up For a Recovery Buy

Friday, September 18, 2020 | Jea Yu
Stitch Fix (NASDAQ: SFIX) Stock Gearing Up For a Recovery BuyOnline styling and apparel retailer platform Stitch Fix (NASDAQ: SFIX) shares have been in a slow but steady recovery as restarts accelerate. While the Company is an ecommerce play, it has largely been ignored by the ecommerce momentum buyers since the pandemic triggered isolation mandates stifled the demand for fashion and business casual apparel. Instead, demand for athleisure ,comfort wear and accessories were the winners. As workers return to offices and social engagements, the demand should migrate back to Stitch Fix’s wheelhouse making it a recovery narrative play. Prudent investors should monitor opportunistic pullbacks off the triple top resistance to step into the recovery trade especially as a COVID-19 vaccine approval nears.

Q3 FY 2020 Earnings Release

On June 8, 2020, Stich Fix released its third-quarter fiscal 2020 results for the quarter ending May 2020. TheCompany reported earnings-per-share (EPS) loss of (-$0.33) excluding non-recurring items versus consensus analyst estimates for a loss of (-$0.15), a (-$0.33) per share miss. Revenues dropped (-9.09%) year-over-year (YoY) to $371.73 million, falling short of consensus estimates by (-$42.82) million. Some of the highlights of the quarter include a 9.4% YoY rise in active clients to 3.4 million and rise of 6% YoY in net revenue per client to $498. The Company delivered a positive YoY growth in net merchandise revenues for the month of May 2020.

Conference Call Takeaways

Stitch Fix CEO Katrina Lake painted a positive narrative on the quarter pointing out that, “While massive apparel retail declined 80% in recent months, we saw only a (-9%) YoY dip that’s to the resilience of our large auto-ship client base and the strength of Direct Buy.” Lake anticipates a stronger consumer shift to frictionless online from traditional brick and mortar as a result of the pandemic, which is the Company’s core sweet spot. Stitch Fix President Elizabeth Spalding estimates $30 billion will “rapidly” shift online which is 3X more than a typical year. The Company’s auto-ship program saw an opt-out uptick during pandemic peaks in April but quickly saw a recovery in May underscoring the best retention rate in three years. Direct Buy is a low commitment but low friction gateway to the Company’s personal shopping experience, the “Fix” offerings. Direct Buy saw “no signs of abatement” in Q3 tracking above its pre-COVID estimates despite the pandemic backdrop again underscoring the resiliency of its growing customer base.  

Parlaying the Growth

The boost in active clients and average revenue per client are the key drivers positioning Stich Fix for a growth surge as economic restarts accelerate. Due to the stay-at-home mandates, many consumers were introduced to the Stich Fix platform despite the (-25%) drop in marketing expenses. The Company has started ramp up marketing efforts as isolation restrictions get lifted. The bottom line here is that as people return to social and professional engagements, its time to update the wardrobe. This is causing the run ups in the brick and mortar retailers as money rotates into value from growth momentum names. Stitch Fix happens to be a technology play with consumer discretionary products that benefits more from the recovery narrative. The pandemic opened the floodgates for online and mobile sales channels, Stitch Fix benefits from that as the demand for its wares rebound. Prudent investors should watch the reaction to the triple top-level and Q4 FY2020 earnings due out Sept. 22, 2020, for opportunistic pullback entries.

Stitch Fix (NASDAQ: SFIX) Stock Gearing Up For a Recovery Buy

 SFIX Opportunistic Pullback Price Levels

Using the rifle charts on the monthly and weekly time frames provides a broader view of the landscape for SFIX stock. The monthly rifle chart triggered market structure low (MSL) buy above $15.19 as it triggered a monthly mini pup breakout.  However, SFIX has put in very strong resistance near the $30.07 Fibonacci (fib) level resulting in a triple top. The weekly stochastic has crossed back up off the 50-band stochastic indicating a potential Cup-and-Handle formation triggering on the breakout through the triple top resistance. A rejection off that level or rug pull on its Q4 FY2020 earnings results may provide opportunistic pullback levels at the $25.64 fib, $24.08 monthly 5-period moving average and fib, $22.67 monthly MSL trigger and fib and $21.28 overlapping fib. Patience and prudence is needed to wait for pullbacks either on the test of the triple top level or on an earnings release reaction. If the earnings release forms a price gap, then look for potential entries on pullbacks retesting the triple top to see if it transforms into a support. This can enable the next leg up to the $37.40 fib range.  

Companies Mentioned in This Article

CompanyBeat the Market™ RankCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Stitch Fix (SFIX)1.5$35.27+4.8%N/A-235.12Buy$26.10
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10 Video Game Stocks That Will Cause Investors to Jump Off Their Couch

Video games are big business. In 2019, sales of video games were nearly $150 billion worldwide according to the research firm Newzoo. That marked a 7.2% growth from the previous year. And, at the time of the report Newzoo estimated that global video game sales would rise to nearly $160 billion in 2020.

But in the aftermath of the Covid-19 pandemic, things may be changing. The video game industry is undergoing profound changes. Consumers truly have an a la carte model for gaming. Do they want to use a traditional console? They can. How about their laptop? Check. And they can also use their mobile device.

But it’s not just the hardware they use. Multiplayer games are now the rage as is the ability to play online versus other competitors. And then there’s the whole movement towards esports which is helping to inspire a service like Twitch that allows people to watch other people play video games.

As investors, the growth of digital downloads and cloud-based streaming is playing a significant role in the way video game stocks are perceived. And it’s a big reason why many video game stocks are among the best investments at the moment.

In this special presentation, we’ll look at pure-play video game stocks as well as technology companies that are leveraging their strengths to get a share of this growing pie.

View the "10 Video Game Stocks That Will Cause Investors to Jump Off Their Couch".

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