Stock Soars 268%: Reddit’s $ANF Underdog Triumph

Quick Look

• Reddit User’s Bold Prediction: SillyGoose41212’s January 2022 post on WallStreetBets predicted Abercrombie & Fitch’s stock is vastly undervalued.
• Stunning Growth: Since the prediction, Abercrombie & Fitch’s stock surged by 268%, outpacing even AI giant Nvidia in 2023.
• The company’s success is due to a multi-year turnaround plan initiated by the CEO.

The past year brought an unexpected turn in the story of Abercrombie & Fitch, a brand previously emblematic of late ’90s and early 2000s casual luxury. As the stock price climbed to new heights, Wall Street analysts and investors were left in awe, puzzled by the sudden revival. Amid this, an insightful observer from the WallStreetBets subreddit, known as SillyGoose41212, had predicted such a surge in a post dated January 10, 2022. SillyGoose41212 argued that Abercrombie & Fitch’s stock was significantly undervalued. This keen analysis spotlighted crucial elements that might breathe new life into the retailer’s fortunes, which had been dwindling. Abercrombie & Fitch has since embarked on an awe-inspiring ascent, culminating in a near-all-time high of $131 per share.

Stock Rockets 901%: Turnaround Triumph

SillyGoose41212’s post, titled “Abercrombie & Fitch ($ANF) is cool again… and the stock is GROSSLY undervalued,” laid out a persuasive argument. It highlighted the company’s impressive 60% gross margins and its proactive share buyback strategy. Furthermore, it underscored Abercrombie & Fitch’s trading valuation at just a 4x multiple of its trailing twelve-month enterprise value to EBITDA and a price-to-sales ratio of merely 0.5x. This argument for undervaluation arose when Abercrombie & Fitch’s stock was trading at levels last seen in December 1998 despite the company’s leading profitability metrics.

Then, under CEO Fran Horowitz’s guidance, Abercrombie & Fitch began a transformative journey in 2017. This multi-year plan aimed to revitalise the brand, addressing past criticisms of its mall-based retail strategy and slow e-commerce growth. Consequently, this strategic shift gradually rebuilt investor confidence and reignited consumer interest. As a result, the stock surged from its low point in September 2022, achieving an incredible 901% increase by 2023. This growth, fueled by a meticulous overhaul of the business, effectively aligned the brand with current consumer preferences and market trends.

Wall Street’s Continued Skepticism

Despite the stock’s impressive rally, Wall Street analysts maintain a cautious optimism about Abercrombie & Fitch’s future prospects. Currently, the stock has more “Hold” ratings than “Buy” recommendations. Additionally, the average price target indicates a modest downside potential. This scepticism stands in stark contrast to the optimism among retail analysts. For instance, JPMorgan’s Matthew Boss has gradually increased his price target for Abercrombie & Fitch. Boss attributes the brand’s comeback to its “90s-esque brand momentum.” This momentum carries a nostalgic appeal, captivating both long-time fans and new consumers alike.