I’m an investment analyst. Not a trading analyst. As such, I’m not looking for a quick profit. Rather, I’m looking for stocks to buy today and sell in five or ten years for 100%, 200%, 300%, even 1,000% or bigger profits. It’s a long-term investment strategy built to generate long-term wealth — and with that in mind, one of my favorite stocks to buy today is Stitch Fix (NASDAQ:SFIX) stock.
Stitch Fix stock stock operates a data-driven online retail personalization platform that represents the future of how we shop for clothes. It’s a niche product today, used mostly by high-income, single females. Yet by 2030, the amount of people regularly shopping online for clothes will cause Stitch Fix to become a household name.
The company’s subscriber base, revenues and profits will all soar as Stitch Fix stock goes from niche to ubiquitous over the next decade. As go profits, so go stocks. SFIX will be no exception — and that’s why the multi-year outlook for this stock is so compelling.
Long-term, Stitch Fix’s stock is a great investment for long-term bulls.
Stitch Fix Stock: The New Way to Shop
Stitch Fix has a unique and compelling opportunity to fundamentally change the way we shop, from shopping haphazardly in store for clothes on an irregular basis, to shopping smartly online on a regular basis.
This disruptive potential boils down to three huge value-additive features of the Stitch Fix business model.
First, Stitch Fix is online. This one is obvious. Most apparel shopping still happens offline. But a lot of that shopping has been shifting online for the past several years. This trend will persist, because online shopping offers significant convenience advantages over offline shopping, and to the customer, convenience is king.
As such, Stitch Fix makes shopping faster and more convenient through digitization.
Second, Stitch Fix is personalized. Consumers love smartly personalized experiences. Stitch Fix leverages shopper and fashion trend data and puts all that data into advanced data science models, creating smartly personalized shopping experiences built on curated apparel assortments unique to each user. In so doing, Stitch Fix is essentially morphing into everyone’s personal stylist, which should improve shopping outcomes for consumers.
As such, Stitch Fix makes shopping better and smarter through personalization.
Third, Stitch Fix is (mostly) a subscription business. As much as consumers love smartly personalized experiences, they equally love subscription business models for their consistency and convenience. Stitch Fix turns shopping into a subscription business model through monthly “clothing boxes.”
As such, Stitch Fix makes shopping more consistent and easier through subscriptions.
It doesn’t take a rocket scientist to connect the dots. Through its unique, hyperpersonalized e-commerce platform built on the back on subscriptions, Stitch Fix is making shopping faster, more convenient, better, smarter, more consistent, and easier.
Stitch Fix is simply improving the shopping experience. That’s why this company has a compelling opportunity to turn into the future of apparel shopping — and why SFIX stock is a long-term winner.
Business Momentum Is Building
Due to the Covid-19 shuffle, Stitch Fix’s multi-faceted value props weakened. But, as consumers have learned to better adjust to life with the pandemic, Stitch Fix is starting to shine.
In the first quarter of fiscal 2021 (which roughly lines up with the third quarter of calendar 2020), Stitch Fix added 240,000 new clients, a record-high number and more than double what the platform added in the previous quarter (just 100,000).
More than that, these new clients were hyper-engaged with Stitch Fix. Nearly 80% of first Fixes in the quarter were “successful” as clients who purchased at least one item in their first Fix and said they looked forward to their second fix. That’s a record high.
Meanwhile, Stitch Fix’s “success rate” in the quarter — the percentage of time clients purchased a given item — also hit record highs in the quarter.
Why all the record high engagement metrics? A few reasons.
Stitch Fix is getting bigger, which means more data, which means a more enhanced “style graph,” and better apparel recommendations. The personalization engine is only getting stronger. At the same time, the company is fleshing out new features like Direct Buy and Shop by Category to make Stitch Fix more shoppable and increase buying conversions.
These drivers are secular in nature. They will persist for the near future. As they do, Stitch Fix’s newfound business momentum will persist, too.
That’s why management is guiding for revenues to rise more than 20% for the full-year 2021, implying 30%-plus revenue growth in the back-half of the year, a sharp acceleration from -9% growth just two quarters ago.
Alongside this accelerating growth, SFIX stock will keep powering higher.
Stitch Fix Stock Has Tons of Upside
Taking a step back, Stitch Fix is an innovative online apparel company, with unique personalization and subscription advantages, and a ton of business momentum right now.
Put together, that means Stitch Fix today has healthy visibility to disrupting the near $2 trillion global apparel market over the next few years.
Yet, Stitch Fix is worth just $8.5 billion today.
To that end, this big rally in SFIX stock is far from over. Instead, it’s just beginning.
Bottom Line on Stitch Fix Stock
Stitch Fix’s personalized apparel shopping model built on the back of subscriptions represents the future of shopping. To that end, SFIX stock is a long-term winner. It’s one of the best long-term stocks to buy and hold for the next several years.
But it’s not the best growth stock to buy today.
Instead, the best growth stock to buy today is a company that reminds me of a young Amazon (NASDAQ:AMZN). Indeed, I think buying this stock today could be like buying AMZN stock back in 1997 — before it soared thousands of percent.
Which stock am I talking about?
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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