Morgan Stanley Reevaluates Retail, Specialty Retailer Stocks: UBRN, CPRI, JWN, And More

Morgan Stanley analyst Alex Straton recently changed his view on retail stocks, specifically specialty retailers. Here’s what investors need to know.

The URBN Takeaways: Straton said he is becoming increasingly bullish on Urban Outfitters, Inc (NASDAQ:URBN). He upgraded the stock to Overweight from Equal-Weight, and raised the price target to from $27 to $41.

Urban Outfitters’ 2023 earnings forecasts are conservative. Straton also noted its low relative valuation compared to peers, which skew the risk-reward scenario to the upside.

The CPRI Takeaways: Straton downgraded Capri Holdings Ltd (NYSE:CPRI) to Equal-Weight from Overweight. He also lowered the price target from $55 to $40.

The potential for negative EPS revision risk in the near term overshadows a clear long-term valuation re-rating opportunity, Straton says.

The JWN Takeaways: Straton reiterated an Underweight rating, and a $16 price target for shares of Nordstrom Inc (NYSE:JWN).

The analyst said Nordstrom reflects risk across multiple variables, leading to more conviction in its underweight rating.

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The BBWI Takeaways: Straton reiterated an Underweight rating, and a $61 price target for shares of Bath & Body Works Inc (NYSE:BBWI).

According to Straton, Bath & Body stands out for its achievable 2023 earnings forecasts and its potential for further re-rating. The company also boasts a favorable ranking within the equity strategy team’s trade idea framework.

The LULU Takeaways: The analyst also reiterated an Underweight rating, and a $424 price target for shares of Lululemon Athletica (NASDAQ:LULU).

Similar to Bath & Body, Lululemon stands out for its conservative 2023 earnings forecasts and the possibility for further re-rating.

The Overall Take: Morgan Stanley’s U.S. equity strategists foresee a meaningful earnings recession in 2023, ahead of a sharp rebound in 2024.

The analyst recommends owning defensive stocks with operational efficiency and earnings stability.

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