Stitch Fix is a $2.05B online subscription and personal shopping service. Founded in 2011, its business model entails sending customers individually picked clothing and accessories for a one-time styling fee. Current stock price as of April 2018 is $21.17.
Buy at $21.17 and hold until 2022, with a target price of $30.00 and a stop loss price of $13.00
SFIX is a buy because while e-commerce is growing rapidly, most online apparel retailers lack the personalization that people value in shopping for clothes. Stitch Fix addresses this concern with its stylist-client connections and style algorithms.
The retail industry is experiencing a growing online penetration. The online retail industry is expected to grow from $70B in 2017 to $133B in 2022, with a 13.8% CAGR. Stitch Fix’s main competitors in the market are established retailers and online shopping giants, such as Macy’s, Nordstrom, and Amazon. However, no other company has the same combination of customization, machine learning, and professional stylists that Stitch Fix offers. Stitch Fix also has a superior business model to Le Tote, a comparable company that has forced subscriptions.
The company’s risks include competition from existing retailers and a slowing growth among its main customer base. Its areas of growth include more partnerships with luxury brands, new customer bases, and private labels to increase profit margins.