• Abercrombie & Fitch (ANF) traded 20% higher on Thursday morning, after posting earnings that firmly beat Wall Street expectations.
  • While we believe the stock has more upside potential in the near term, our intermediate term outlook is negative.

The clothing retailer reported earnings per share of $0.33 and total revenue of $861 million, above analyst estimates of $0.20 and $855 million. Management expects same store sales to rise between 2-4% for the fiscal year.

Based on improved Q3 performance, Abercrombie now expects to close only 40 stores compared to the 60 stores that it had previously expected to close. Likewise, according to CEO Fran Horowitz, “We had a solid start to the holiday season.”

Our analysis is based on the market cycles for ANF. We had this stock as negative, with a bottom overdue and stretched. We note the double top and the megaphone bottom that just formed. Our upside target is $23-34, based on the fact that it’s still early in the rising phase of the cycle. However, we are still cautious in the longer term.

For more from Slim, or to learn about cycle analysis, check out the askSlim Market Week show every Friday on our YouTube channel.