Urban Outfitters off 5%; Second Half Recovery or Sell On Inconsistency?

After Urban Outfitters reported lackluster results highlighted by a big drop in margins for the fourth quarter, opinion is quite wide on what the company and the stock can do.

Shares of the clothing retailer Urban Outfitters (URBN) are down 4.6%, or $1.39, to $28.12.

A sampling of Bearish opinions:

Citigroup Analyst Jeff Black: Raised price target from $24 to $26,� lowered 2012 earnings estimate and maintained his Sell rating.

“URBN�s new team outlined a departure from its long-term objective for 20% sales growth and faster profit growth as it ramps spending to invest in e-commerce and international. Operating expenses are set to grow at a mid-teens rate this year …� That puts the onus on gross margin to drive profit in 2012 after a (700) basis point decline in the operating margin in 2011. And that makes consensus a stretch, in our view.”

Jefferies Analyst Randal J. Konik: Price target $17, maintains Underperform rating.� Says “we still don’t believe and would continue to avoid this name.”

“Fourth quarter results did nothing to change our cautious view … the operating model is inconsistent, margins remain under pressure, and the business is not turning. Clean inventories and slightly better full-price selling are not a cure-all. We think numbers will remain challenged and that shares are too expensive; reiterate UP rating. We see much better value in true global growth names like Guess (GES) and Abercrombie & Fitch (ANF).”

A sampling of Bullish opinions:

Roth Capital Partners Analyst Elizabeth Pierce: Price target $33,� maintains Buy. Says URBN remains a “best of breed retailer.”

“Despite some near-term merchandise issues, we believe URBN remains a �Best of Breed retailer given its excellent track record, solid balance sheet, and significant growth opportunities, including global expansion, the launch of new brands and a growing direct business. … At $29.51, URBN trades at 20.4x our FY2013 EPSe estimate of $1.45. Based on our FY2013 EPS estimate of $1.45, the stock is trading at a discount to our 3 year compound annual growth rate of 23% … our price target is based on our FY2013 EPS estimate of $1.45 and an estimated 3-year CAGR of 23%.”

Janney Montgomery Scott Analyst Adrienne Tennant: Maintaining target of $31 and earnings estimates for 2012 and 2013.

“We believe with current trends in fashion and areas of opportunity to drive sales and gross margin, we have increased confidence in a 2H12 product recovery … Our FY12 EPS estimate remains $1.50 (versus consensus of $1.53), and our FY13 EPS remains $1.80 (versus consensus of $1.90). We believe the positive impact from product improvement will become more evident as we move through 1H12 … We do note much higher SG&A dollar growth of mid- to high-teens throughout 2012 …� however, this does not change our belief on the timing of a 2H12 recovery.”