Here’s why Stitch Fix stock price crashed over 25% today

Shares of Stitch Fix (NASDAQ: SFIX) lost over a quarter of its value today after the company reported disappointing results for its quarter to end-January. 

Fundamental analysis: Disappointing guidance

Stitch Fix said it lost $0.20 per share, which is still better compared to the $0.22 expected from analysts. However, revenue missed the analysts’ estimates - $504.1 million vs $512.2 million expected.

The company blamed shipping delays in December for lower-than-expected revenue. On a more positive note, SFIX added 110,000 new active clients to bring the total tally to 3.9 million clients worldwide. 

Investors were especially disappointed to see the full-year revenue guidance downgraded to 18% to 20%, lower than 20% to 25% previously communicated. This is also lower than the 22.6% expected from the surveyed market analysts.

Deutsche Bank analyst Kunal Madhukar downgraded the stock to “Hold” from “Buy” following today’s results, citing “potential near term headwinds associated with macro trends and slower growth in revenue per client,” and a “delay in rolling out Direct Buy to non-subscribers” as key drivers behind his call. 

Technical analysis: Shares crash

Stitch Fix stock price crashed over 25% today to trade below the $50 mark for the first time in three months. This way, the stock is trading more than 35% lower in March, adding to a 20% loss recorded in February. 

The price action is now trading below the key bull/bear line around the $53 mark. This is the 2018 high for the stock, which has acted as an all-time high until a major rally in SFIX took place. Shares are now approaching the $42 support line, while a close below $52.70 will transform this level into a major resistance line.

Summary

Stitch Fix reported weaker-than-expected revenue and full-year guidance to send its shares crashing over 25%.