On Thursday, BMO Capital Markets adjusted its price target on shares of Urban Outfitters, Inc. (NASDAQ:URBN), raising it to $42 from the previous $38, while keeping a Market Perform rating on the stock.
Urban Outfitters disclosed its earnings results last evening, revealing that both its top and bottom lines did not meet market predictions. However, the company's gross margin surpassed its initial fourth-quarter guidance but did not reach the updated forecast provided in January. Management attributed the shortfall in January’s revenue to severe winter storms and unusually low temperatures, even though the month was also marked by a notably tougher year-over-year comparison.
The performance of the Urban Outfitters (UO) brand specifically has been weak, but the company's management is aiming for a turnaround with a focus on the Back-to-School season. They have indicated that new leadership at the UO brand is dedicated to driving improvements throughout the year.
The analyst from BMO Capital cited the ongoing challenges with the UO brand as a reason for maintaining a neutral stance on the stock. Despite the target price increase to $42, which is roughly 11 times the projected earnings for fiscal year 2025, the firm's position remains cautious due to the uncertainties surrounding the brand's recovery.
InvestingPro Insights
As Urban Outfitters (NASDAQ:URBN) navigates through its recent financial turbulence and analyst adjustments, insights from InvestingPro provide a clearer picture of the company's standing. With a market capitalization of $3.82 billion, Urban Outfitters is trading at an adjusted P/E ratio of 12.68 for the last twelve months as of Q4 2024, which suggests a valuation that could be considered attractive relative to its near-term earnings growth. This is complemented by a PEG ratio of just 0.22, indicating potential undervaluation when factoring in growth estimates.
Urban Outfitters has demonstrated resilience with a revenue growth of 7.47% over the last twelve months as of Q4 2024, reflecting the company's ability to expand its sales amidst a challenging retail environment. Despite the stock's volatility, as noted in one of the InvestingPro Tips, the company has shown a strong return over the last three months with a price total return of 15.27%.
InvestingPro Tips highlight that Urban Outfitters does not pay a dividend to shareholders, which may be relevant for income-focused investors. Additionally, analysts anticipate the company will remain profitable this year, following a profitable last twelve months. For those considering a deeper dive into the company's prospects, InvestingPro offers a total of 10 tips on Urban Outfitters, which can provide further guidance on investment decisions.
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