Although Urban Outfitters (URBN) gave up some of its earlier gains, Canaccord Genuity thinks the stock can ultimately rise more than 25%.
Analyst Laura Champine upgraded the stock to Buy from Hold, with a $48 price target. She writes that the market, which has sent the stock down 11% in the past two weeks, has been overacting to the company's announcement earlier this month that sales were trending mid-single-digit positive so far in the quarter. She sees the sales as indicative of "sustained market share gains given the challenging apparel environment."
"E-commerce penetration of around one-quarter of total sales makes URBN the strongest public specialty apparel retailer online. We expect this channel to sustain rapid growth as management aspirations are at 50% penetration," she writes. "Unit growth is above average. We project the store base growing at a five-year CAGR of 7% versus the average retailer we cover at +5%."
Also part of her thesis: The fact that Urban is growing its consolidated store base at a compounded annual rate of 7% over the next five years, ahead of the average 5% for the other retailers in her coverage universe. Champine notes that the Anthropologie brand is in the midst of a turnaround as well, with same-store sales growing 9% in the second quarter.
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