Can Urban Outfitters’ Stock Repeat Its Post-2008 Performance And Return To $25 Once The COVID-19 Outbreak Is Reined In?

by Trefis Team
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Urban Outfitters
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Urban Outfitters (NASDAQ: URBN) stock is likely to outperform the broader S&P 500 index post coronavirus and oil price war crisis, going by the trends seen during the 2008 slowdown, where it fell 25% from the approximate pre-crisis peak in 2008, and recovered 110% by early 2010. Although the decline in Urban Outfitter’s stock was lower, the recovery was higher than that of the S&P 500. We compare the performance of Urban Outfitters vis-à-vis the S&P 500 in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did Urban Outfitters Stock Fare Compared With S&P 500?

On Monday, 9th March, the stock market entered into a phase of extreme volatility, with two significant sell-offs on Monday and Thursday being separated by days of partial recoveries. Overall, there have been two distinct trends driving the recent sell-off: the increasing number of Coronavirus cases outside China is adding to concerns of a global economic slowdown, and crude oil prices have plummeted by more than 20% after Saudi Arabia triggered a price war by increasing production. Urban Outfitters’ stock declined by about 27% between 8th March 2020 and 23rd March 2020 (vs. a 25% decline in the S&P 500), and the stock is down almost 46% since 1st February after the WHO declared a global health emergency in light of the coronavirus spread (vs. about 30% decline in the S&P 500 since then). The decline in Urban Outfitters’ stock is understandable, considering the impact that the outbreak and a broader economic slowdown are likely to have on total consumption/consumer spending in the global apparel industry. Moreover, people are just not going out to shop for luxury or even basic apparel. In fact, the company has temporarily shuttered all its stores across the globe, which is further impacting the company’s performance. The company also withdrew its earnings guidance provided after the release of its Q4 results (ending January), citing uncertainty relating to the potential impacts of COVID-19 on the company’s business operations, including its duration and its impact on the overall demand for merchandise.

Potential for more than 100% gains in Urban Outfitters’ stock (if history repeats), and its timing, hinges on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread

 

Urban Outfitters Stock versus S&P 500 Over 2020 Coronavirus/Oil Price War Crisis

  • Urban Outfitters’ stock declined by almost 19% between 8th March 2020 and 24th March 2020 (vs. an 18% decline in the S&P 500), and the stock is down almost 40% since 31st January after the WHO declared a global health emergency in light of the coronavirus spread (vs. about 27% decline in the S&P 500 since then).

 

Urban Outfitters Stock versus the S&P 500 During 2007-08 Financial Crisis

  • Drawing lessons from the 2008 financial crisis, we see Urban Outfitters’ stock declined from levels of around $22 in October 2007 (the pre-crisis peak) to levels of around $17 in March 2009 (as the markets bottomed out) – implying the company’s stock lost as much as 25% from its approximate pre-crisis peak.
  • This marked a lesser decline than the broader S&P, which fell by as much as 51%
  • Despite this, the stock recovered strongly once the recession passed – rising by 110% between March 2009 and January 2010. In comparison, the S&P rose by about 48% over the same period.

 

Conclusion:

While Urban Outfitters’ stock has declined due to the Coronavirus crisis, going by trends seen during the 2008 slowdown, it’s possible that it could bounce back strongly and potentially outperform as the crisis winds down.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture. It complements our analyses of Coronavirus impact on a diverse set of Urban Outfitters’ multinational peers – from Coronavirus and Tapestry to impact on competitor Guess and Coronavirus on L Brands stock. The complete set of coronavirus impact and timing analyses is available here.

 

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