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The Ratings Game: Medical scrubs company Figs sees shares tumble after weak outlook, but analysts say there’s plenty of room to grow

Medical apparel and accessories company Figs Inc. saw shares slide 0.7% in Monday trading and 1.4% on Tuesday after earnings missed Street expectations, but analysts remain upbeat about the road ahead.

Figs
FIGS,
-1.36%

reported a net loss of $40.5 million, or 26 cents per share, after net income of $14.2 million, or 9 cents per share last year. Adjusted EPS of 8 cents beat the FactSet consensus for a loss of 20 cents.

Revenue of $101.1 million was up from $64.1 million and ahead of the FactSet consensus for $88.9 million. This marked the first quarter that revenue exceeded $100 million, Trina Spear, co-chief executive of the company, said on the earnings call.

See: Figs will focus on medical scrubs now, but could set its sights on other industry uniforms in the future

The number of active customers grew more than 79% year-over-year to reach 1.6 million.

Figs is guiding for full-year revenue of about $395 million below the FactSet consensus for $399.1 million.

Credit Suisse analysts say the company struck a conservative tone on its first earnings call as a public company. Still, analysts rate the stock outperform with a $41 target price.

“Figs added some 2H cushion in case recent southeast Asia COVID lockdowns impact the supply chain (nearly every brand made similar comments in 2Q,” wrote analysts led by Michael Binetti.

Companies like Nike Inc.
NKE,
-0.99%

have been impacted by factory shutdowns in Vietnam.

“At this point, we think Figs conservatism is anticipatory, and don’t believe it’s seeing any delays or unplanned air freight yet.”

Moreover, analysts think the long-term plan is still on track.

Also: Authentic Brands IPO: 5 things to know about the company behind Sports Illustrated, Forever 21 and Marilyn Monroe

“We think the underpinnings of the long-term thesis are intact — Figs remains a disrupter in a stagnant category with growing brand awareness (market share only 3%), increasing repeat/replenishment health metrics, and visible TAM [total addressable market] expansion opportunities,” Credit Suisse said.

Cowen analysts also think the guidance “should prove conservative” and maintained their outperform rating and $51 price target.

And KeyBanc Capital Markets analysts say innovation should be a strength for the company moving forward, with new colors and high-waisted scrub pants proving popular.

“We think Figs has a compelling revenue growth opportunity as well as some of the most attractive economics in DTC [direct-to-consumer],” analysts said.

KeyBanc rates Figs stock overweight with a $45 price target.

Figs stock began trading on May 27, and shares have gained 5.6% over the past month.

The Renaissance IPO ETF
IPO,
-0.52%

has slipped 2.3% for the year to date while the S&P 500 index
SPX,
-0.71%

has gained 18.4% for the period.

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