As Nvidia stock and Meta Platforms continue to set more record highs, hot retailer Abercrombie & Fitch is flexing its own muscles by outpacing the returns from these Magnificent Seven stocks. Nvidia, Meta and Abercrombie all earn a perfect 99 Composite Rating, the highest-possible score.
On Wednesday, Abercrombie topped earnings and sales estimates. The company said it earned $2.97 per share on revenue of $1.45 billion. Earnings surged 267% vs. the year-ago period, while sales climbed 21%.
The teen-friendly apparel retailer also issued a forecast for fiscal 2024 revenue growth of 4% to 6%; it earned $4.3 billion in 2023. That growth rate is a slowdown from the prior year, hinting that the retailer's momentum might finally be stalling after a huge price run.
That outlook weighed on the company's shares Wednesday. Abercrombie shares lost 3.5%, just off Tuesday's 52-week high price. The stock dropped another 5.2% Thursday, threatening to extend those losses.
Since a June 2 breakout past a cup base's 31.69 buy point, the stock has gone on a picture-perfect run. Shares tested their 10-week moving average several times on the way up, but never even dipped below that moving average.
That means that investors who bought in the buy zone were able to sit tight without any serious tests of their conviction, similar to Nvidia stock since early January.
Looking For The Exit
Looking ahead, investors should aware of potential exits. And there are two potential offensive sell signals worth monitoring.
First, Abercrombie shares are close to breaking above an upper channel line that stretches back to June. That line connects multiple points on the weekly chart. Further strength would likely push the stock above that channel line.
Meanwhile, shares are more than 100% above their long-term 200-day moving average. Per IBD research, once a stock gets 70% to 100% above its 200-day moving average, watch out — the rally may have gotten ahead of itself. Very few issues can sustain that kind of momentum indefinitely.
According to an internal IBD study done in the mid-1990s, leaders topped once they got 111% on average above their 200-day lines. On Tuesday, Abercrombie closed more than 114% above that long-term level.
Abercrombie Outpaces Nvidia Stock
Over the past year, Abercrombie shares are up nearly 391%, more than Nvidia stock's 265% return and Meta's 165% advance. Meanwhile, Super Micro Computer is up more than 1,000% over that same time period.
Nvidia stock rallied 3.8% Thursday, hitting more record highs. Shares are more than 75% above a flat base's 505.48 entry. Nvidia stock is an IBD Leaderboard stock.
Meta shares climbed 2.9% Thursday, also setting record highs.
Super Micro stock gained 1.4% Thursday, just off Wednesday's highs.
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