Wednesday, November 23, 2005

Follow Up: URBN

Readers of our newsletter have heard us rave about Urban Outfitters for a very long time.

Retailers we follow include: American Eagle, Abercrombie and Walmart, all of which have hit the street with cheerful news as of late.

Many retail stocks were mauled and trampled on after sales hiccups and three devastating hurricanes, bringing them down to perversely low multiples.

Urban Outfitters, for instance, should never trade under $30.

When it did, we bet the house on a regression to the mean.

And it paid off.

Months ago we put a $34 price target on the niche retailer:
"...URBN belongs to the "fast growers ostracized by valuation-driven bears" crowd. As long as a company is growing its earnings as fast as Urban is, we're more than happy to pay the high multiple. Urban Outfitters, which carries a relatively large market cap for such a young company, plans to open roughly 30 stores over the next 12 months. URBN's rocking numbers come from their attractive demographic: concept-driven twentysomethings with money to spend. Think Manhattan studio worm seeking chic futon. If earnings -- due out 11/4 -- surprise the Street, we should see this niche wonder climb back to its 52 week high. Buy rating on URBN with a $34 price target.
There is still a fair amount of short interest clawing at the stock, but we're raising our price target on Urban Outfitters to $38.

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