Stitch Fix Stock Drops on Wells Fargo Downgrade

Stitch Fix also received price-target hikes from Needham and Telsey Advisory

Digital Content Manager
Dec 3, 2020 at 9:53 AM
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The shares of Stitch Fix Inc (NASDAQ:SFIX) are down 2.9% at $38.25 at last check, after the equity received a downgrade from Wells Fargo to "underweight" from "equal weight," citing an unfavorable risk/reward model. Paring further losses, however, are two price-target hikes to $46 from Needham and Telsey Advisory. Stitch Fix is expected to report first-quarter earnings after the close on Monday, Dec. 7.

Digging deeper, the security has been carving a channel of higher highs since dropping to a March 16, all-time-low of $10.90. Shares have nearly quadrupled in the past several months to hit a Nov. 30, two-year high of $42.38, with support from the 40-day moving average since September. Longer term, SFIX sports a healthy 63.2% year-over-year lead. 

Analysts were evenly split toward the equity coming into today, with eight of the 16 in coverage carrying a "buy" or better rating, and the remaining eight sporting a tepid "hold" or worse. Meanwhile, the security's 12-month consensus target of $33.89 is a whopping 11.4% discount to current levels, indicating price-target hikes are well overdue for SFIX.

Options traders have been eyeing puts with greater gusto lately. The equity’s Schaeffer’s put/call open interest ratio (SOIR) of 1.30, which sits three percentage points from an annual high. This means short-term options traders have rarely been more put-biased in the past 12 months.

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