20 Undervalued Momentum Stocks That Are Taking Off

14. Urban Outfitters Inc. (NASDAQ:URBN)

3-Month Price Change: 32.9%

Forward PE: 14.1

Number of Hedge Fund Holders: 35

Urban Outfitters Inc. (NASDAQ:URBN) is one of the 20 undervalued momentum stocks that are taking off. On June 17, Citi analyst Paul Lejuez highlighted Nuuly, Urban Outfitters’ (URBN) apparel rental business, as a key driver of the company’s future growth. In a note following an investor event held last week, Lejuez reiterated his Buy rating on URBN with a $75 price target, emphasizing the growing importance of Nuuly in the broader business strategy.

Nuuly, a part of the company’s subscription segment, is primarily a monthly women’s apparel subscription rental service and offers a wide selection of the Company’s brands, third-party brands and one-of-a-kind vintage pieces via a custom-built, digital platform. Subscribers select their products each month, wear them as often as they like, and then swap into new products the following month.

While rental models in apparel have typically been subject to skepticism from investors, Lejuez suggests that Urban Outfitters may have found a way to make the economics work. He believes Nuuly has emerged as the clear leader in the rental segment and is already showing signs of profitability, which appears no mean feat in this space.

Lejuez also argues that the market undervalues Nuuly’s growth potential as he estimates that it could drive up to 40% of Urban Outfitters’ total revenue growth over the next five years. His analysis suggests that this upside is not fully reflected in the current share price.

As such, Lejuez believes that Nuuly deserves more investor attention in the future, as it may play a much larger role in shaping Urban Outfitters’ growth trajectory than currently assumed.

Urban Outfitters Inc. (NASDAQ:URBN) is a lifestyle products and services company that operates a portfolio of global consumer brands, primarily including Anthropologie, Free People, FP Movement, Urban Outfitters, and Nuuly.