San Francisco is a city populated with a lot of very smart technology minds and companies; one tech firm that is based there also doubles as an apparel company, observes Jim Woods and Mark Skousen, editors of Fast Money Alert.
We're talking about Stitch Fix, Inc. (SFIX), which has been described as a “digital dresser.” The company uses a blend of proprietary algorithms and human stylists to put together customized outfits for users. The company then sends customers shipments of clothes and accessories that it has determined will look good on that customer.
The shares are moving higher as part of the strong trend that is customized digital retail. We’re calling this service a “digital Dapper Dan,” as it helps online clothing buyers look good. Yet, what looks even better than the outfits put together by SFIX is that company’s share-price potential going forward.
Stitch Fix is the kind of stock we love. Not only has it seen heavy buying of late, but it is also showing high relative price strength. How strong? Well, over the past four weeks they are up more than 25%. Despite those gains, though, we think there’s much more upside in this one.
One reason why is that SFIX is growing its earnings robustly, with a 200% change in earnings per share last quarter vs. the prior year. That Q3 report also includes a 30% increase in active clients, as well as the announcement of several new company initiatives, such as the selling of stand-alone items and expansion into men’s and plus-size clothing.
Stitch Fix is slated to report fiscal Q4 earnings on Oct. 1, so getting in on the stock here will allow us to take advantage of what we suspect will be a nice move higher leading up to the release. So let’s buy Stitch Fix at market, with a protective stop set at $29.40.
