Figs Stock Quietly Jumped 53.8% in October. Here's Why.
Figs barely made any news last month. Its stock jumped 53.8% anyway.
In October, Figs (FIGS) experienced a remarkable 53.8% increase in its stock price, according to S&P Global Market Intelligence data. This outperformance contrasted sharply with the S&P 500's minimal decline of just 0.9%. Interestingly, Figs' reasons for success remained largely unpublicized, with no earnings reports or acquisitions to announce. The company's October communications focused on seasonal product launches, including a fall color collection and children's scrubs released for Halloween.
The turning point for Figs came on October 12th when an industry review recognized the company as the top performer among apparel and accessories firms for the second quarter. This quarter saw impressive results, with revenue reaching $196.6 million, surpassing expectations by 5.6%, and earnings of $0.15 per share, more than double the anticipated $0.07.
Following this positive news, Figs' stock surged 12.4% on the day, with more than triple its normal trading volume. Analysts had already raised their full-year earnings estimates by approximately 23%, leading to several firms increasing their price targets. Momentum investors particularly appreciated this signal, and the options market revealed a shift from bearish put options to bullish call options, indicating a growing confidence in the stock's upward trajectory.
Despite the stock's robust performance, Figs' valuation has increased. Currently, the stock trades at around 68 times trailing earnings and 58 times next year's expected profits, surpassing Wall Street's average price target of $21.12. Investors are eagerly anticipating Figs' third-quarter results, which are scheduled for release on November 5th. High expectations for strong sales, improved margins, and reduced discounts are now in place, and any shortfall could potentially weaken the stock's momentum.
Another aspect to consider is the supply chain, which has faced challenges since August due to a U.S. import restriction on a supplier based in Jordan. While this situation may not directly impact Figs' stock, it adds an element of uncertainty to the company's operations. Despite these factors, Figs maintains a healthy balance sheet with approximately $240 million in net cash and relatively low debt.
However, investors are advised to closely monitor Thursday's earnings report as it could significantly impact Figs' stock price.
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