One of the biggest stories of last week was how Stitch Fix, Inc. (NASDAQ:SFIX) shares plunged 25% in the week since its latest quarterly results, closing yesterday at US$2.43. Revenues were in line with expectations, at US$330m, while statutory losses ballooned to US$0.30 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus, from the twelve analysts covering Stitch Fix, is for revenues of US$1.31b in 2024. This implies a considerable 12% reduction in Stitch Fix's revenue over the past 12 months. Losses are forecast to narrow 6.8% to US$0.94 per share. Before this latest report, the consensus had been expecting revenues of US$1.35b and US$0.79 per share in losses. While this year's revenue estimates dropped there was also a noticeable increase in loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.
The consensus price target fell 14% to US$3.42, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Stitch Fix at US$4.00 per share, while the most bearish prices it at US$2.25. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that revenue is expected to reverse, with a forecast 23% annualised decline to the end of 2024. That is a notable change from historical growth of 2.5% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.1% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Stitch Fix is expected to lag the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Stitch Fix. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Stitch Fix's future valuation.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Stitch Fix going out to 2026, and you can see them free on our platform here..
You still need to take note of risks, for example - Stitch Fix has 4 warning signs we think you should be aware of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
