Stitch Fix Even Trades Like Netflix
Two months ago, I wrote a post about Stitch Fix,
Stitch Fix, Inc. sells a range of apparel, shoes, and accessories through its Website and mobile app in the United States. It offers denim, dresses, blouses, skirts, shoes, jewelry, and handbags for men and women under the Stitch Fix brand.
Just like Netflix disrupted the at home movie streaming market, Stitch Fix is disrupting apparel retail by allow you to choose your own clothes from a selection of clothing. Stitch Fix is your own stylist on a budget. They send you five items at a time based on an interface through which you select your style preferences, budget, and fit.
This past week, Stitch Fix even traded like Netflix. You remember when Netflix entered a bear market two months ago when the stock dropped 21% after its July 16 earnings report on weaker-than-expected subscriber growth.
Well, Stitch Fix did the same thing this past week.
Stitch Fix stock has gained 12% for the year to date, Stitch Fix Inc. fell 35% on Tuesday due to a revenue miss and weaker-than-expected active client numbers. The revenue miss was very small, $318.3 million versus a consensus of $318.9 million. And even though the active client numbers grew by 25% year-over-year to about 2.7 million, analyst were looking for 2.82 million active users. I personally think the valuation get ahead of the story, which is why I don’t chase trades.
Nevertheless, Stitch Fix continues to make the right investments in new products and categories to drive revenue and economies of scale. The company launched Style Pass, a service providing unlimited styling for $49 per year, in December 2017. And in the fourth quarter, the company launched Stitch Fix Kids. In fiscal 2019, Stitch Fix will expand to the U.K.
Similar to Netflix who uses technology to get to know their customers, Stitch Fix has put their spin on technology as well with an interactive, mobile and web-based game with clients that we call Style Shuffle.
This game provides merchandise choices to customers which get rated "with a thumbs up or thumbs down." These preferences are added to a customer's profile, making the selection engine even smarter which has helped increase from 9% in 2015 to over 22% now.
Stitch Fix is also trying to increase revenue through its Style Pass which allows unlimited Fixes with an annual $49 fee. Also, they have feature called Extras which allows customers to buy socks or undergarments without paying styling fees.
While their investments need time to gain some traction and because Stitch Fix can continue to expand their total available market, many analysts have price targets between $30 and $45.
So is this a buying opportunity for Stich Fix, lets go to the charts to find out?
The chart suggests there is still more downside risk. Price should slow down at the $20 level and will be selling at a steep discount at $16.50.
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by rollandthomas
Interesting comparison... Not sure if the business model has the same appeal that Netflix has given its mobility.
Thank you for sharing this interesting stock with us. I will have to take a look for sure !
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