What Happened?

Shares of clothing and accessories retailer Urban Outfitters (NASDAQ:URBN) jumped 5.3% in the morning session after data from Adobe Analytics, which tracks retail transactions, revealed that shoppers spent a record $10.8 billion online on Black Friday (2024), representing more than a 10% growth compared to the previous year, and more than double what consumers spent in 2017. 

This is a bullish 'read-through' for retailers and aligns with some of the positive sentiments and holiday spending trends observed by some of the companies that have reported this earnings season.

After the initial pop the shares cooled down to $50.67, up 3.9% from previous close.

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What The Market Is Telling Us

Urban Outfitters’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business. 

The previous big move we wrote about was 5 days ago when the stock gained 17.1% on the news that the company reported strong third quarter financial results. Urban Outfitters beat analysts' sales expectations. The top line reflected strengths across retail, subscription, and wholesale segments. The company recorded a significant increase in gross profit margin, reflecting higher merchandise markups and lower markdowns in key brands. This enabled URBN to also beat on profit and earnings. Zooming out, we think this was a solid quarter. 

Following the results, Citi analyst Paul Lejuez upgraded the stock's rating from Neutral to Buy and raised his price target from $42 to $59. The analyst cited the reasons for the upgrade, adding that while 3Q's comparable sales were weak overall, there were several signs that the brand is moving in the right direction: 1. Profitability improved for the first time in many quarters. 2. Comps/traffic improved sequentially throughout 3Q and exited the quarter in better shape.

Urban Outfitters is up 41.8% since the beginning of the year, and at $50.67 per share, has set a new 52-week high. Investors who bought $1,000 worth of Urban Outfitters’s shares 5 years ago would now be looking at an investment worth $2,002.

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