Abercrombie & Fitch’s (ANF), stock has recovered after a sharp drop earlier in the month. The stock price has increased by nearly 40%, and it was at $170 – its highest level since July 17, this year.
ANF is a top retailer, and has become so in recent years. The management engineered an impressive turnaround which has driven its stock levels to record highs. This year it has grown by 90 percent, surpassing other retailers like American Eagle and Guess?
In the past five years, the same thing has occurred. The stock has risen by more than 1,000% and surpassed the S&P 500 Index, as well as Bitcoin which has climbed by 550% during this time.
Growth in revenue and profits
Abercrombie & Fitch’s stock has risen as management focused on reengineering the company.
The management has been working to renovate its stores, improve its style, lower its debt, better manage inventory and increase its online sales. The company has expanded geographically and forged stronger partnerships with influential people.
Abercrombie & Fitch has not shown a particularly impressive financial performance, despite its stock having risen by 1,000% over the past five years.
The company’s revenue increased from $3.623 to $4.2 billion. Management hopes to have revenue between $4.1 and $4.3 billion in 2025, while their longer-term goal is $5 billion. It is a good but not outstanding growth rate, particularly when you compare it to the stock’s performance.
Abercrombie & Fitch, on the other hand, has been focusing its efforts to achieve profitable growth. As shown in the chart below, Abercrombie & Fitch’s gross margin increased from 57.75% at 2022, to 64% over the past twelve months. In this time, its EBITDA has increased from 6.51% up to 16.29%. The company hopes to grow its operating margin from 8% up to 10% over the long-term.
Abercrombie & Fitch has managed its balance sheet well. The company has no debt on short term and its borrowings have been reduced from $343 millions in 2020 to just $213 million as of the latest report.
Capital leases can be a significant part of a retailer’s liabilities. In this instance, however, it is clear that the company did well. It has successfully reduced capital leases in 2019, from $1.2 billion to $656 millions.
Earnings to come
Earnings are important for an exploding stock because they tell investors if a company’s doing well. ANF will release its earnings report on Thursday.
ANF stock is known to move a lot after earning. After releasing financial results, the stock soared almost 30% in May and hit its highest level ever. It dropped over 15% in the previous financial report.
Analysts predict that ANF will have generated $1.1 billion in revenue last quarter, a significant increase over the $935 millions it earned in the same time period of 2023. Analysts expect its earnings per share to be $2.2, up from the $1.1 that it earned in Q2 ’23.
Total sales for the year are expected to reach $4.79 billion. This represents a growth of 12% from one year ago.
The traders are also interested in the forward guidance as well as margin guidance.
ANF Stock – Is it a Good Buy?
Abercrombie & Fitch is a stock that has mixed opinions from analysts. JPMorgan analysts raised the stock from neutral to overweight in a July note. Argus research downgraded the company from buy to holding in July.
Analysts from Citigroup, Telsey Advisory Group and UBS also maintained a neutral view of the company. According to the average estimation, the fair value of the company’s stock is $192. This is higher than its current price of $169.
ANF appears to be a bargain from a valuation perspective, as it is trading at an forward P/E of 16, which is lower than the average S&P 500 index of 21. The industry median for ANF is 17.34.
Abercrombie & Fitch stock price analysis
ANF’s share price reached a low of $121.2 during August, when most other stocks were falling. The stock has recovered by nearly 20%, and it is now on the verge of entering a bullish market. The stock jumped and crossed the critical resistance at $140. Its highest point was on March 5,
Stocks have also turned the moving averages of 50 and 100 days into levels of support. It has also formed a pattern that looks like a flag, which indicates more upward movement. The stock would then rise up to its all-time-high of $195 where it would form a double top pattern. Bulls would need to raise it above this level in order to invalidate any bearish views of the pattern.
The post Abercrombie & Fitch Stock: Moment of Clarity Nears can be updated as new information unfolds
