What Happened?
Shares of personalized clothing company Stitch Fix (NASDAQ: SFIX) jumped 2.9% in the afternoon session after the company embraced artificial intelligence by deploying a new AI-powered stylist feature, and an analyst at UBS raised their price target on the stock.
The subscription fashion company unveiled a conversational AI Style Assistant and personalized style visualization tools to help customers discover new clothing. According to CEO Matt Baer, the firm is using its proprietary data and the latest advancements in GenAI to fix the “undeniably broken” experience of shopping for clothes.
Adding to the positive sentiment, UBS analyst Jay Sole boosted the firm's price target on the shares to $6.00 from $5.00, a 20% increase, while maintaining a Neutral rating. The move also came amid a supportive backdrop for apparel retailers, as recent Commerce Department data showed that sales at clothing and accessories stores rose 1% in August.
The shares closed the day at $5.49, up 0.1% from previous close.
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What Is The Market Telling Us
Stitch Fix’s shares are extremely volatile and have had 47 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock gained 2.5% on the news that the latest Consumer Price Index (CPI) report came in largely as expected, reinforcing investor hopes for an upcoming Federal Reserve interest rate cut. Data from the Bureau of Labor Statistics showed headline inflation for August at a 2.9% annual rate, with core inflation, which excludes volatile food and energy prices, holding steady at 3.1%.
While inflation remained above the Federal Reserve's target, Wall Street interpreted the figures as not being high enough to prevent a widely anticipated rate reduction at the central bank's meeting next week. Analysts noted that the Fed's focus had shifted toward the risks of a cooling labor market. With this report being the last key data point before the meeting, the market's conviction for a rate cut strengthened, fueling a broad rally that pushed major U.S. stock indexes to record highs.
Stitch Fix is up 25.6% since the beginning of the year, but at $5.49 per share, it is still trading 17.3% below its 52-week high of $6.64 from December 2024. Investors who bought $1,000 worth of Stitch Fix’s shares 5 years ago would now be looking at an investment worth $194.06.
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