Greetings from Las Vegas, where I'm attending the annual Stansberry Conference & Alliance Meeting at the Aria Resort & Casino...
I'll be pitching my favorite stock ideas on Wednesday. In the meantime, I'm looking forward to hearing from an amazing lineup of speakers – including Porter Stansberry, Dr. David "Doc" Eifrig, actor Henry Winkler, financial commentator Kyla Scanlon, and many others.
As usual when I'm on the road, I'll still be keeping up with my usual topics in my daily e-mails. That includes a fresh look at a stock in the wake of a big move last week...
Shares of clothing retailer Stitch Fix (SFIX) crashed by 22% on Thursday and closed Friday at about $2.15. That's only pennies above the stock's all-time low two-and-a-half years ago.
As of Friday's close, Stitch Fix is down a staggering 98% from its all-time high in January 2021, when it got caught up in the meme-stock bubble. Here's a chart of the stock since the November 2017 IPO:
I took a first look at Stitch Fix in my January 14 e-mail. And did a deeper dive after becoming a customer and receiving my first clothing order in my January 26 e-mail.
I concluded that the stock was an "interesting speculation," but that it was too small and speculative for our flagship Stansberry's Investment Advisory newsletter.
Since my January 26 e-mail, Stitch Fix is down 61%. But I've still had an eye on the stock. And the company has reported three more quarters of earnings, so let's update the key charts of historical financials...
Remember that Stitch Fix's revenue soared and losses piled up in the early years – and the company saw a boost from the COVID-19 pandemic. But revenues have been steady for the past three years, and operating losses have shrunk to $16.5 million in the past four quarters. Take a look:
Meanwhile, quarterly free cash flow ("FCF") has managed to stay mostly positive in recent years. Over the past year, FCF came in at a healthy $19.8 million. Here's a fresh chart of cash from operations, capital expenditures ("capex"), and FCF:
As the stock price has declined, Stitch Fix has ramped up its share repurchases. As you can see, these have surged in recent quarters:
The aggressive share repurchases have eaten into Stitch Fix's cash. But the company still has a healthy balance sheet – with $104.2 million of net cash:
Had you shown me these numbers without telling me the share price, I would have guessed that the stock was flat – mirroring the company's results this year.
But instead, the stock is down 61% since late January. As of Friday's close, the company now has a market cap of a mere $288 million and an enterprise value of only about $184 million. That's equal to multiples of 9.3 times trailing FCF and 0.14 times trailing sales of roughly $1.35 billion.
This also values each of Stitch Fix's roughly 2.28 million active subscribers (who spent an average of $592 over the past year – up 7.8% year over year) at only $81.
Any way you look at it, Stitch Fix appears to be very cheap...
But is it a melting ice cube that will make its stock a value trap?
Tomorrow, I'll dig a bit deeper into the company's recent earnings report and share a bullish write-up on the stock. Stay tuned!
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.
P.P.S. Before coming to Vegas, I spent last week with my parents at our extended family's property on Lake Sunapee in New Hampshire – where the fall foliage is just beginning to appear:
The property requires a lot of work to maintain, and everyone pitches in. My wife Susan cleaned up the icehouse and emptied the kitchen – putting everything in the living room and dining room so the guys replacing the ceiling, countertop, and floors in the kitchen can start work today:
My dad and I pulled our two motorboats out of the water (for you antique boat lovers, the one in the top picture is a 1906 Fay & Bowen):
And we painted the small cabin. These pictures show what my dad did on his own before I arrived:
Then I used the ladder to finish the job. Doesn't it look great? I get so much satisfaction from painting – turning something tired and ugly into something fresh and beautiful:
I also painted/stained a bunch of doors – here are before and after pictures of two of them:
