Torrid Holdings Shares Soar Over 30% on Earnings Beat; Target Price $32 in Best Case

Torrid Holdings shares jumped over 30% on Thursday after the largest direct-to-consumer brand of women’s plus-size apparel reported better-than-expected earnings and revenue in the second quarter and said its net sales increased 34% on e-commerce business and improvement in-store productivity.

The company, which offers plus-size clothing and accessories for women size 10-30, reported adjusted earnings per share of $0.36, beating the Wall Street consensus estimates of $0.13.

The company’s revenue jumped over 30% year-on-year to $332.9 million. That was also higher than the market expectations of $290 million. That increase was largely driven by continued growth in its e-commerce business and improvement in-store productivity trends.

Torrid forecasts fiscal third-quarter net sales in the range of $305 million and $315 million and adjusted EBITDA of between $47 million and $52 million. For the full year, the company predicted net sales in the range of $1.29 billion to $1.31 billion and adjusted EBITDA of between $248 million and $258 million.

Following this Torrid Holdings shares jumped over 30% to $24.43 on Thursday. The stock is up over 16% since its debut on the New York Stock Exchange in July with an IPO price of $21.

Analyst Comments

Torrid Holdings (CURV) reported significant 2Q upside (top-line, GM), with strength continuing into 3Q, driving the guide ~40% ahead of cons. While sourcing bottlenecks are a headwind, they appear less onerous than feared. Concerns around potential competitive pressures are likely to linger background for now, but current momentum should help to quell near-term concerns. Raising estimates, Reiterate Buy,” noted Janine Stichter, Equity Analyst at Jefferies.

“As the leader in the plus-size market with strong digital capabilities, Torrid looks well-placed to benefit from outsized growth in the sector while driving share gains. A loyal customer base and low-risk merch strategy mitigate risk and drive stability in the model. LT earnings algo (HSD%+ revs, LDD% EBITDA growth) is likely conservative.”

Torrid Stock Price Forecast

Eight analysts who offered stock ratings for Torrid in the last three months forecast the average price in 12 months of $29.14 with a high forecast of $32.00 and a low forecast of $26.00.

The average price target represents a 19.13% change from the last price of $24.46. From those eight analysts, seven rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $28 with a high of $41 under a bull scenario and $10 under the worst-case scenario. The firm gave an “Overweight” rating on the company’s stock.

“2Q’s 3% revenue beat & strong flow thru highlight a strong print. At 1-2% share of women’s plus size apparel spending, we see upside to our 7% 2021-23 Base Case revenue CAGR forecast. Superior fit, fashion & quality differentiate CURV from value-priced players. Raising 2022/23 adj EBITDA 9%/4%,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

“We are constructive on CURV’s product fit expertise in women’s plus sizes, low fashion risk assortment, and sector-leading digital penetration (70% 2020), with eComm EBIT margin at least at parity with the store. The plus-size clothing category is forecast to grow at twice the rate of the US apparel industry comparable to the demand outlook for global activewear. Our 9% 2019-23 CURV revenue growth CAGR appears conservative given < 2% dollar market share, underdeveloped digital marketing versus peers, and new store growth opportunity. Stronger than expected comps and improving leverage on non-merchandise expenses could provide some upside to our near-term revenue and EBIT margin estimates.”

Several other analysts have also updated their stock outlook. Robert W. Baird set an “outperform” rating and a $30 price target. The Goldman Sachs Group issued a “neutral” rating and a $26 target price. Cowen issued an “outperform” rating and a $30.

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