ANF ​​Stocks Rise as Analysts Provide Bullish Updates

New trends are developing in the U.S. stock market that will soon attract professional investors – and traders – to consumer discretionary stocks. These securities are characterized by their high exposure to the underlying economic and business cycle. For specific reasons you’ll learn shortly, there will be an upcoming influx of investment dollars into these stocks.

Because of these capital rotations, you’ll find that – unsurprisingly – Wall Street analysts have chosen to upgrade price targets on stocks like Abercrombie & Fitch New York Stock Exchange: ANF on the back of a bullish thesis for the apparel and retail sector. You can follow the same “top-to-bottom” process that professional traders use when looking for places to put their capital to good use. This involves in-depth analysis of the entire economy down to specific sector dynamics.

Before we dive in, remember that you’ll need to understand why analysts are increasing their views on Abercrombie & Fitch stock relative to other noteworthy mentions in the industry. These include names like American Eagle outfitters NYSE:AEO AND SPLIT New York Stock Exchange: GPS. Here’s a spoiler: Abercrombie & Fitch turns out to be a cut above the competition.

A new playing field

THE SPDR fund for selected consumer discretionary sectors New York Stock Exchange: XLY it has underperformed the broader S&P 500 index over the past six months. However, the picture changes if you zoom in on the last five days.

On a six-month basis, the consumer sector has lagged as much as 5% and has outperformed the market by the same amount over the past week. Why did sentiment suddenly change in favor of the consumer sector? It’s actually a lot simpler than you think.

One of the main leading indicators that professionals follow when crafting their trading and investment ideas is the ISM Manufacturing PMI Index, where you can find that the apparel sector has recently seen a surge in business activity, a sign that Big players always pay attention to potential opportunities.

After contracting in November and December, the apparel industry suddenly showed an expansionary turn, which also showed an aggressive acceleration from December to now. There are reasons to believe that this trend is not a fluke but a sign of a significant rotation.

The market expects cyclical sectors (such as consumer discretionary stocks) to outperform the market in the coming quarters; Why? Traders believe that the Federal Reserve (the Fed) will cut interest rates by May 2024. You can see this expectation live by following the FedWatch tool available on the site CME Group Inc. NASDAQ: ECM.

As lower interest rates make money cheaper and make consumer financing more flexible and available, the apparel industry is showing signs of expanding production and inventory levels in preparation for increased demand on these new financing and purchasing trends.

Here’s the goal

Of course, business is one of the many things that professionals look at. Tracking employment trends, the jobs report shows that the apparel and department store industries combined added 18,800 jobs over the past month, a period in which the overall economy created 353,000 jobs. Work.

Representing a significant 5% of total jobs added, you can probably see that hiring managers are hiring in droves waiting for the same demand to arrive in subsequent quarters, a wave you can catch — early — today in Abercrombie & Fitch stock .

Combining everything you know now, it should come as no surprise to learn that analysts at Telsey Advisory Group have improved their price targets on the stock, reflecting a valuation of $140 per share, implying an upside of about 3% from the level of stock trading. Today.

But Telsey is not alone; analysts of UBS Group New York Stock Exchange: UBS AND Citigroup NYSE:C they also raised their price targets to levels that have proven conservative today, making them ripe for another boost coming sooner rather than later.

A final check for market favoritism comes from traditional valuation metrics such as the price-to-earnings ratio. Trading at a P/E of 21x, Abercrombie & Fitch sits above GAP’s 17x valuation and American Eagle’s 16x valuation. Additionally, Abercrombie & Fitch trades at a 36% premium to the industry’s average P/E valuation of 16x.

Remember the saying “It has to be expensive for a reason” because it applies here; now you know why analysts are bullish on ANF stock. Happy surfing on the bull wave.

Before considering GAP, you’ll want to hear this.

MarketBeat tracks daily Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and GAP wasn’t on the list.

While GAP currently has a “Hold” rating among analysts, top analysts believe these five stocks are better buys.

View the five stocks here