Baird analyst Erika Maschmeyer upgraded her rating on Abercrombie & Fitch Co. on Monday, saying the teen retailer may be in turnaround mode.
Abercrombie struggled for some time to sell its clothing as the economy has left teens around the world with tighter budgets and they turned to lower-priced competitors. The New Albany, Ohio-based company also failed to seize on some shifting tastes in fashion.
Maschmeyer said she was encouraged by Abercrombie's recent third-quarter results, in which the company's U.S. sales returned to growth and its trends improved internationally. The chain also raised its full-year forecast.
The quarter's results suggest that the worst is over, Maschmeyer said. And since that report in November, checks by her firm in stores give her greater confidence in the company's merchandising and strategy improvements.
The analyst upgraded her rating to "Outperform" from "Neutral," but said this investment is "not for the faint of heart," as there are still some remaining risks. The company could have a potentially choppy recovery and the tough macroeconomic conditions continue to weigh on its international business.
Maschmeyer raised her price target on Abercrombie's shares to $55 from $48.
Abercrombie's shares took a nosedive in the spring but began to recover in November after it posted its third-quarter results. In Monday's session, the stock added 88 cents, nearly 2 percent, to close at $47.27.
The stock has traded in a 52-week range of $28.64 to $54.10.