Abercrombie & Fitch Co. (ANF): A Bull Case Theory

We came across a bullish thesis on Abercrombie & Fitch Co. on Trendinvest’s Substack by Makios. In this article, we will summarize the bulls’ thesis on ANF. Abercrombie & Fitch Co.'s share was trading at $98.67 as of July 30^th. ANF’s trailing and forward P/E were 9.73 and 9.18, respectively according to Yahoo Finance.

Abercrombie & Fitch (ANF) appears significantly undervalued despite delivering strong fundamentals and multiple near-term growth catalysts. Trading at just ~10x free cash flow, ~9x forward P/E, and less than 1x sales, the company is growing revenues from $3.7B in 2023 to an expected $4.9B by 2025, while improving margins and maintaining a healthy balance sheet. The business operates with 8–10% net margins, ~30% ROE, and minimal China tariff exposure (~5–6%), limiting downside risk from geopolitical tensions. Q1 FY2025 results were strong, with a $1.59 EPS beat versus $1.33 expected.

ANF has also authorized a $1.3B buyback program, with $200M spent in Q1 alone—no dilution, just enhanced shareholder value. Recent stock weakness stems from tariff concerns and sluggish Abercrombie brand performance, not deteriorating fundamentals. Notably, Hollister, which accounts for ~50% of revenue, is seeing strong traction, fueled by a Gen Z-focused strategy including viral TikTok collaborations such as with Spencer Barbosa and a hit 2000s retro collection. Web and foot traffic data suggest robust in-store activity and growing online interest.

A second catalyst looms: the launch of a 25th anniversary collection on July 29, already generating millions of views and viral momentum on social media. While core Abercrombie remains flat, recent signs hint at a potential rebound. Alternative data (Google Trends, TikTok metrics, website traffic) shows rising interest across both brands. With a PEG ratio of just 0.22, the market seems to be pricing in none of this growth or brand momentum. An inflection point may be near, and sentiment could shift fast.

Previously we covered a bullish thesis on Urban Outfitters (URBN) by Value Don’t Lie in September 2024, which highlighted strong free cash flow, brand strength, and capital returns. The stock has appreciated approximately 115.35% since our coverage as the thesis played out. The thesis still stands. Makios shares a similar view on Abercrombie & Fitch, emphasizing viral brand momentum and near-term catalysts.

Abercrombie & Fitch Co. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held ANF at the end of the first quarter which was 51 in the previous quarter. While we acknowledge the potential of ANF as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.