Benzinga | Sep 17, 2020 02:03PM EDT

Why Needham Is Turning Bullish On Stitch Fix

Stitch Fix Inc (NASDAQ:SFIX) is gaining strength by diversifying its model and following an aggressive client acquisition strategy, while benefiting from favorable secular trends, according to Needham.

The Stitch Fix Analyst: Rick Patel upgraded Stitch Fix from Hold to Buy, while establishing a price target of $36.

The Stitch Fix Thesis: The Direct Buy option diversifies the company, positing it better in the broader market for apparel, footwear, and accessories, which represents a total addressable market of $400 billion, Patel said in the note.

He mentioned four key reasons for the bullish rating:

2 "Direct Buy expanding SFIX's TAM, increasing loyalty, driving share gains from department stores, and generating higher revenue per client";

4 Improved customer acquisition through aggressive marketing, increased personalization via the Trending For You approach, and progress in the UK;

6 An improving assortment as the company "leverages data and strong vendor relationships to chase trends"; and

8 Shift towards e-commerce becoming a more permanent trend.

SFIX Price Action: Shares of Stitch Fix traded higher by 1.3% to $28.63 at the time of publication Thursday.