Investing in stocks stocks, even when they’re up, allows investors to set the stage for potential long-term gains. This is why today, we’re looking at one that’s up by a whopping 126%. Yet, it could have even more room to run. This strategy capitalizes on the market’s cyclical nature; prices fluctuate due to various factors, including market sentiment and economic indicators.
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Why buy high?
When a fundamentally strong company’s stock price declines, it doesn’t necessarily reflect a deterioration in the Canadian stock’s intrinsic value. But it’s the same when shares rise. Market overreactions can lead to temporary price drops, presenting savvy investors with opportunities to buy quality stocks at reduced prices. Over time, as the market corrects itself, these stocks often rebound, rewarding patient investors with substantial returns. Yet even when shares remain high, investors could still miss out on further growth.
Aritzia (TSX: ATZ) serves as a compelling example of this investment approach. Despite nearing all-time highs, Aritzia stock’s underlying business remains robust. Suggesting that the current price could be an opportune moment for long-term investors to consider adding the stock to their portfolios, even at these prices.
In its second quarter of fiscal 2025, Aritzia reported a 15% increase in net revenue compared to the same period in the previous year, reaching $615.7 million. This growth was driven by a 24% increase in U.S. sales, highlighting the company’s successful expansion efforts south of the border. Additionally, e-commerce sales returned to double-digit growth, with a 10% increase in net revenue, indicating a strong response to their fall product line and increased online traffic in the U.S.
Future outlook
Looking ahead, Aritzia has outlined an ambitious strategic plan aimed at further growth. The Canadian stock intends to open eight to 10 new boutiques annually and expand three to five existing boutiques each year through fiscal 2027, resulting in annual square footage growth in the low double digits. This expansion is complemented by their e-commerce 2.0 strategy, which focuses on enhancing online shopping experiences to drive further growth in their digital sales channels.
Analysts have taken note of Aritzia’s strong performance and future prospects. The Canadian stock is forecasted to grow earnings and revenue by 59.7% and 13.5% per annum, respectively, with earnings per share expected to increase by 44.9% annually. This optimistic outlook reflects confidence in Aritzia’s ability to execute its growth strategies effectively and maintain its position in the competitive retail market.
Despite these positive indicators, Aritzia’s stock has recently been downgraded by Raymond James from an “outperform” rating to a “market perform” rating, with a price target of $58.00. This suggests that while the company exhibits strong fundamentals, there may be concerns about its valuation or potential market challenges. Investors should consider this perspective when making investment decisions.
Bottom line
Trading at $58 as of writing, this milestone indicates renewed investor interest and confidence in the company’s future prospects despite the stock’s previous decline from all-time highs. Yet, the Canadian stock could have even more room to run. So, while buying stocks during a downturn can be a strategic move for long-term investors, buying high isn’t so bad either.
Aritzia’s recent performance and future plans suggest that the company is well-positioned for continued success. As always, investors should conduct thorough research and consider their individual investment goals and risk tolerance before making investment decisions.
