On the surface, it might not seem that Canadians have entered a bull market. And it’s true, we haven’t as of yet when it comes to technicalities.
A bull market occurs when there is a sustained period of gains, usually defined as when the stock market rises by up to 20%. There are others that say this is lower, at around 10% or 15%. However, neither has occurred on the TSX today.
The TSX has been up and down all throughout 2023 and fell below the 20,000 mark most recently. So, we certainly aren’t in a bull market yet. Even so, this means investors can get in on growth stocks before a bull market arrives. And one I would consider is Aritzia (TSX:ATZ).
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Hand in hand
Aritzia stock is certainly a stock to consider during a bull market. After all, a bull market means that consumers across the country have more money to spend. They’re therefore putting it towards investments. But it also means they’ll be putting it towards consumer products.
Aritzia stock certainly stands out among the batch. The retail stock surged in share price, as its United States operations gained traction during the pandemic. Since then, it’s done better than ever — that is, until recently.
Earnings were disappointing, as the pressure of inflation finally hit home. Now, let’s look at what could cause it to turn around.
Eager for better earnings
Analysts made several cuts to the price targets on Aritzia stock after the company cut its forward guidance for the year. The first quarter of 2024 saw net revenue at $463 million, which actually beat out estimates. Further, its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came out ahead at $32 million.
Yet overall, there was slower traffic, as the economy continues to struggle with inflation and interest rates. Sales were down, and this led to the company decreasing its forecasted revenue for the second quarter of 2024.
The news led analysts to cut the price target significantly, placing Aritzia stock at a “hold” rather than a “buy.” Yet this might be exactly why it’s time to buy the stock.
Beyond fiscal 2024
While the news wasn’t great for the next two quarters, that’s where investors should get greedy. A bull market will be coming soon, and when it does, Aritzia stock investors will want lots on hand at a great price. Analysts remain optimistic about the rest of the year, with more openings leading to more sales. What’s more, a rise in demand as the economy recovers will likely lead to far more sales.
Furthermore, even though the company downgraded its targets, it’s likely these will be quite conservative. After all, it’s far better to come out ahead rather than fall below your own estimates. Should this happen, it could trigger another buying reaction as a bull market heats up.
Overall, Aritzia stock is likely to remain under pressure in the near term. Even so, in the medium and long term, the stock is certainly a buy, according to analysts — one that is likely to grow in a bull market environment.
