Urban Outfitters, Inc. Slide on Analyst Downgrade

Urban Outfitters, Inc. (NASDAQ:URBN) plummeted after an analyst at Goldman Sachs downgraded the rating and price target for the stock.

The stock price of Urban Outfitters, Inc. (NASDAQ:URBN) declined almost 15% to $29.40 per share at the time of this writing around 2:02 in the afternoon in New York.

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Goldman Sachs’ rating for Urban Outfitters

Goldman Sachs’ analyst Lindsay Drucker downgraded her rating for the shares of Urban Outfitters, Inc. (NASDAQ:URBN) to Neutral and lowered her price target to $31 per share. The analyst previously had a Buy rating and $44 price target for the stock.

In a note to investors, Drucker downgraded her rating for Urban Outfitters, Inc. (NASDAQ:URBN) after its 3Q results failed to show positive momentum based on their expectations.

Analysts concerned over Urban Outfitters’ EPS recovery

“We still believe in the long-term potential of the story and are optimistic a UO brand turnaround is on the horizon, but with the Anthro brand now showing signs of softness, we are concerned a recovery in EPS and sentiment will take longer to materialize,” said Drucker.

Goldman Sachs reduced its earnings estimate for Urban Outfitters, Inc. (NASDAQ:URBN) from $1.93 to $1.72 per share for the fiscal 2015. Its EPS estimate for the fiscal 2016 also declined from $2.32 to $1.93 and for 2017 from $2.58 to $2.13.

Drucker noted that the promotional activity of Urban Outfitters, Inc (NASDAQ:URBN) showed an “improved cadence at UO,” which was consistent with the commentary of the company’s management regarding tighter inventory and better full-price selling. However, the analyst emphasized, “comps appear to be running down high-single digits.”

“We lack confidence at this stage that the brand will accelerate as much as we had hoped over holidays,” according to Drucker.

Urban Outfitters warned negative impact on 3Q earnings

Yesterday, Urban Outfitters, Inc . (NASDAQ:URBN) warned that its earnings for the third quarter may be negatively impacted due to the continued weakness of its comparable retail sales and potential gross profit margin decline.

Jeffrey Toohig, an analyst at Investment Technology Group commented, “This is clearly a bad sign. There’s fair probability that this bodes poorly for the rest of the year, but that’s not definitive.”