Aritzia Inc (TSX:ATZ)'s stock valuation could exceed $60 per share by the 2025 calendar year representing a return of about 70% from current levels or an annualized return of about 35%, say analysts at Stifel GMP.
According to the analysts, the Canadian women's fashion retailer's stock represents one of the best risk-reward profiles in their coverage universe.
The analysts awarded the stock a ‘Buy’ rating and a 12-month price target of C$50. Aritzia shares are currently trading at C$35.39.
“We revisit Aritzia’s earnings power, which according to our analysis, could reach $4.16 in earnings per share (EPS) in FY27, more than double FY23 EPS, an impressive four-year compound annual growth rate (CAGR) of 22%,” they wrote in a note to clients.
“ATZ has several growth drivers including an approximately 60% increase in square footage by FY27 stemming from renovating/relocating existing stores and entering into 18 new markets in the United States. Consensus revenue for FY25 appear low at approximately 15% year-over-year growth given the expected approximately 20% square footage growth.”
They pointed out that using more aggressive assumptions and under a more bullish scenario, Aritiza’s EPS could exceed $4.75 in FY27. “Under a more bearish scenario, Aritzia's EPS could reach $3.60 in FY27, a 19% EPS CAGR,” they wrote.
In the note, Stifel’s analysts also noted a recent survey they conducted to gain insights into how Canadian women perceive Aritzia in relation to leading global apparel brands. The survey showed that Aritzia ranks third for share of wallet, the analysts wrote.
“According to our survey, 12% of women aged between 18 and 34 chose Aritzia as the brand where they currently spend the most money. H&M ranked first with 33% and GUESS second with 16%,” they wrote.
“We note that Aritzia had a low response rate in Quebec and Atlantic Canada, where store per capita is lower than some of its peers.”
They also highlighted that the brand performed better in terms of online shopping than in-store, ranking 5th out of seven retail chains for in-store shopping experience.
“In our view, the continued upgrade/expansion of the Canadian store network should contribute to a better shopping experience over time by reducing wait times,” they wrote.
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