Stitch Fix (SFIX) PT Cut to $3.50 at Canaccord Genuity, 'HOLD rating is appropriate until a path to customer and top-line growth becomes more apparent'

Canaccord Genuity analyst Maria Ripps lowered the price target on Stitch Fix, Inc. (NASDAQ: SFIX) to $3.50 (from $4.00) while maintaining a Hold rating.

The analyst commented: "Stitch Fix reported fiscal 2Q24 results that were broadly in line with expectations and still reflective of ongoing turnaround efforts, with the top line declining in the high teens y/y amidst continued challenges with gross additions and reactivations in the quarter. Management reiterated its focus on attracting higher LTV customers, and encouragingly, newer customer cohorts are driving some signs of key metric improvement, with the 90- day revenue per active client growing sequentially for the third consecutive quarter. The company continues to iterate its customer touch points, as evidenced by the upcoming launch of a new onboarding experience as well as the introduction of a more direct way to connect with stylists on the platform. Additionally, as media spend across the space is becoming more competitive, the company raised its outlook for advertising spend as a percent of revenue target to 8% (vs. 7-8% prior), and management remains focused on optimizing media performance to improve client conversion and retention. The Q3 outlook for revenue and profitability was below consensus, and FY24 guidance was reduced to reflect these continued operational and industry headwinds. While the ongoing focus on marketing efficiency and optimizing the customer experience is encouraging, we continue to think a HOLD rating is appropriate for now until a path to customer and top-line growth becomes more apparent.

We are lowering our price target to $3.50 (from $4 prior), which is based on <1x FY25E revenue (unchanged) and is supported by DCF valuation"

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