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Few Americans have heard of the up-and-coming name, but this may change over the coming years, as the fast-growing retailer continues its expansion into the U.S. market.
Thus far, Aritzia’s expansion into the U.S. has been met with success, though it is still in its early stages.
In any case, I am bullish on Aritzia stock, as I think the company offers attractive growth at a decent valuation. (See ATZAF stock charts on TipRanks)
The Brand
The Aritzia brand, which is most popular with younger consumers such as millennials, has been getting stronger with time. With brand affinity on the uptrend, Aritzia is a great place to invest if you fear semi-permanent or runaway inflation.
Now, the Federal Reserve still views inflation as transitory. Still, there’s a small chance that Federal Reserve Chair Jerome Powell may be proven wrong. As such, investors should be equipped with brands that have pricing power if inflation does remain heightened for longer.
Does Aritzia Have Pricing Power?
Arguably, one of the best places to be in an environment with problematic inflation levels is the stocks of companies with immense pricing power.
Stronger brands mean greater pricing power. Add double-digit growth potential into the mix, and you could have a stock that can help you outperform in an environment where COVID-19, and inflation above 5%, could persist for many quarters.
Canadian brands don’t always find a spot with American consumers. For instance, the U.S. expansion of Canadian coffee and donut shop Tim Hortons — now owned by Restaurant Brands International (NYSE:QSR) — ended up being a flop. Whereas Canadian athleisure company Lululemon (LULU) has enjoyed a successful expansion beyond the borders of Canada.
Whenever a Canadian brand like Aritzia shows early signs of promise, one could be looking at a potential long-term winner.
Expect More from Aritzia’s U.S. Expansion
Based on what we’ve seen out of Aritzia thus far, it seems like the brand is going down a path similar to that of Lululemon.
Canada and the U.S. are two very different markets. So, it’s vital to stay in the know anytime a Canadian company looks to hit a home run in the U.S. Success at home may be replicable in other markets, but there are no guarantees.
There’s plenty of room for Aritzia to run south of the border. As such, it’s still too soon to conclude that Aritzia’s American push will be without its stumbles. Still, the U.S. push is worth keeping an eye on as Aritzia continues picking up momentum.
The stock isn’t cheap at 70.7 times earnings. However, given early signs that the Aritzia brand is a hit in the U.S., the Canadian growth stock may be worth the premium.
As such, U.S. investors should put the name on their watchlists if they seek potentially overlooked opportunities up north.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, ATZAF stock comes in as a Strong Buy. Out of seven analyst ratings, there are seven unanimous Buy recommendations.
The average ATZAF price target is $33.67. Analyst price targets range from a low of $31.85 per share, to a high of $35.04 per share.
Disclosure: Joey Frenette owned shares of Restaurant Brands International at the time of publication.
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