Where Will Abercrombie & Fitch Go Next?

With shares of Abercrombie & Fitch (NYSE:ANF) trading around $48, is the stock an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for a Stock’s Movement

Abercrombie & Fitch is a specialty retailer of casual apparel for men, women, and children. The company engages in selling a range of products including casual sportswear apparel, graphic t-shirts, fleece, jeans, pants, shorts, sweaters, outerwear, personal care products, and accessories. As trends continue to change, look for a company like Abercrombie & Fitch to adapt and provide the range of products that consumers require.

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T = Technicals on the Stock Chart are Mixed

Abercrombie & Fitch has seen large moves with significant pullbacks. The stock has not made much progress over the last 10 or so years. It has yet to retrace a move back to its pre-crisis highs and does not look poised to head there just yet. Can the stock travel towards its all-time highs once again? Only time will tell, as of now the stock is still in a trading range on the long term price chart.

Evaluating a price trend can be efficiently done with the use of key moving averages. In fact, the key simple moving averages can provide insight into the trend and strength of the trend. What are the key moving averages? The 50-day, 100-day, and 200-day simple moving averages. Abercrombie & Fitch is trading around its key averages which signals further consolidation in the stock.

A good method to gain perspective into investor sentiment is through the use of the options market. More specifically, taking a look at the implied volatility and implied volatility skew levels of Abercrombie & Fitch options may help determine if investors are bullish, neutral, or bearish. The implied volatility of Abercrombie & Fitch options is at 29.37 percent today, which coincides with a 10th percentile over the last 30 trading days and 15th percentile over the last 90 trading days. What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts as compared to the last 30 and 90 trading days.

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The implied volatility skew of April and May put and call options is at about average. So as of today, there is an average demand from call and put buyers or average supply of call and put sellers, all neutral over the next two months. Investors are buying a minimal amount of call and put option contracts and are leaning neutral over the next two months.

E = Earnings Are Mixed Quarter-Over-Quarter

Abercrombie & Fitch should see increasing earnings and revenue growth if that stock is to see any positive price momentum. What do the last four quarterly earnings and revenue growth figures for Abercrombie & Fitch look like? The last four quarterly earnings growth (Y-O-Y) rates have been: 52.63, -45.71, -89.29, and -77.45 percent while the last four revenue growth (Y-O-Y) rates have all been: 8.72, 3.78, 10.1, and 15.61 percent. Abercrombie & Fitch has shown mixed earnings and revenue growth rates.

How did the street take these numbers? The last four quarterly earnings announcement reactions help gauge investor sentiment on Abercrombie & Fitch’s stock. The last four quarters have seen next trading session returns of -4.46, 34.44, 8.94, and -12.98 percent. The street has generally been mixed with Abercrombie & Fitch’s earnings announcements.

E = Average Relative Performance Versus Peers and Sector

Abercrombie & Fitch has seen its struggles over the last few years. How has the stock done relative to its peers and sector? Year-to-date, the stock is returning 2.63 percent while its competitors, American Eagle (NYSE:AEO), Gap (NYSE:GPS), Urban Outfitters (NASDAQ:URBN), and the sector are returning 2.79, 16, 1.15, and 8.31 percent respectively. Abercrombie & Fitch has been a relatively mediocre performer year-to-date.

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Abercrombie & Fitch engages in an industry that allows it to consistently output new products. However, can the company increase overall profits? The stock has seen average return, at best, year-to-date mainly due to its mediocre earnings announcements. STAY AWAY from Abercrombie & Fitch stock for now.

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