On Thursday, UBS maintained a Neutral rating on Urban Outfitters, Inc. (NASDAQ:URBN) but raised its shares target to $43.00 from $42.00. The adjustment comes as the firm anticipates a top-line beat driven by the retailer's various segments.
UBS projects that Urban Outfitters will see an 8.5% year-over-year increase in total revenue, which is based on statistical regression models using industry data that closely correlates with sales.
The forecast by UBS surpasses the sell-side consensus, which predicts a 5.5% year-over-year growth in total revenue. According to UBS, the market's expectations are nearly aligned with the consensus. Urban Outfitters is expected to report first-quarter earnings per share (EPS) at $0.58, which is $0.11 higher than the consensus figure.
UBS suggests that a top-line beat could lead to upward revisions in the fiscal year 2025 EPS estimates for Urban Outfitters and potentially improve investor sentiment. This could result in a slight increase in the company's price-to-earnings (P/E) ratio, which currently stands at 10.7 times.
The options market indicates a potential price movement of approximately +/- 7.8% around the earnings event, which is slightly under the historical average move of 7.9%. UBS expects the stock to experience marginally lower volatility than the options market's implied movement.
InvestingPro Insights
InvestingPro data indicates that Urban Outfitters (NASDAQ:URBN) is trading at a P/E ratio of 13.38, which is considered low relative to its near-term earnings growth. This aligns with UBS's observation of a potentially undervalued P/E ratio. The company's revenue growth over the last twelve months as of Q4 2024 stands at 7.47%, further supporting UBS's projection of a top-line beat with an 8.5% year-over-year increase. Additionally, Urban Outfitters has demonstrated a strong price total return of 53.36% over the past year, which could be indicative of positive investor sentiment and the potential for continued upward momentum in the stock price.
Among the InvestingPro Tips for Urban Outfitters, two particularly stand out in the context of UBS's analysis: the company's stock price movements are quite volatile, and analysts predict the company will be profitable this year. The latter is consistent with UBS's expectation of a top-line beat and an increase in EPS estimates. For investors looking for more in-depth analysis, there are additional InvestingPro Tips available, offering insights such as cash flow sufficiency for interest payments and the company's moderate level of debt.
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