Figs has a strong story for investors who can look beyond the past two years of chaotic price moves, Roth MKM said. Analyst Matt Koranda initiated coverage of the healthcare apparel stock with a buy rating. His $9 price target implies the stock could rally 32% from where it closed Tuesday. “We expect the stock to work as FIGS exercises its strong brand power, driving multi-year accelerating revenue and margin improvement in 2024 and beyond,” Koranda said in a Wednesday note to clients. Shares were up 5.9% Wednesday, bringing the year-to-date gain to 7.7%. Koranda said the stock has been on a “rollercoaster” since the founder-led, direct-to-consumer apparel company known for its scrubs for health care workers went public in an IPO in May 2021. The business and brand is “healthy” despite a tough 2022 and what should be a year of transition in 2023, he said. FIGS ALL mountain Figs This year, he said management will work to clear excess inventory built up during the period of backed-up supply chains in 2021 and early 2022. That will also help free cash flow, Koranda noted. With the backlog behind them, Figs will then be able to lean into innovation and marketing to drive sales growth in 2024 and 2025, the analyst said. Figs should also see moderating operating expenses in those years, he added. Koranda said the brand should be able to maintain its leading market share among medical professionals by leveraging its well-regarded brand and using its scale. He noted Figs was essentially the first direct-to-consumer medical scrub brand when it was created in 2013. He also said the relative stability of the medical field is a plus, especially as retail brands face the threat of softening consumer trends due to the weakening economic backdrop. To be sure, Koranda said Figs’ performance could be affected by increased competition or if the company needs to use excessive promotions to move inventory. Changes in consumer behavior could also affect the Santa Monica, California-based company, he said. — CNBC’s Michael Bloom contributed to this report.
