Do You Believe in the Upward Trajectory of Urban Outfitters (URBN)?

TCW funds, an investment management company, released its “TCW Relative Value Mid Cap Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. The second quarter started with a sharp decline driven by the Liberation Day tariffs announcement by President Trump, but a 90-day pause on certain tariffs led to a strong recovery, propelling the S&P 500 and Nasdaq to new highs. U.S. equities continued to rise in May and June, supported by better-than-expected corporate results and positive jobs reports. Against this backdrop, the fund (I share) returned 7.37% in the quarter compared to 5.35% for the Russell Midcap® Value Index. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, TCW Relative Value Mid Cap Fund highlighted stocks such as Urban Outfitters, Inc. (NASDAQ:URBN). Urban Outfitters, Inc. (NASDAQ:URBN) is a lifestyle products and services company. The one-month return of Urban Outfitters, Inc. (NASDAQ:URBN) was 2.49%, and its shares gained 103.93% of their value over the last 52 weeks. On October 2, 2025, Urban Outfitters, Inc. (NASDAQ:URBN) stock closed at $73.13 per share, with a market capitalization of $6.56 billion.

TCW Relative Value Mid Cap Fund stated the following regarding Urban Outfitters, Inc. (NASDAQ:URBN) in its second quarter 2025 investor letter:

"Urban Outfitters, Inc. (NASDAQ:URBN), headquartered in Philadelphia, PA, is a portfolio of global consumer brands consisting of Urban Outfitters, Anthropologie, Free People, FP Movement, Anthropologie Weddings, Menus and Venues, and Nuuly. The company operates a total of 744 stores globally consisting of 257 Urban Outfitters stores, 241 Anthropologie stores, 237 Free People stores, and nine Menu and Venues locations. At initiation, the stock had a $6.5 billion market capitalization and met four of the five valuation factors: price-to-earnings, price-to-sales, price-to-book and price-to-cash flow. The company does not currently pay a dividend. Catalysts for the investment include a turnaround at the core Urban Outfitters brand, new product launches, growth in adjacent product categories, and growth in new businesses which we believe will lead to continued share gains and profit and earnings upside. Regarding the Urban Outfitters brand recovery, there are two legs the first being cleaning up the inventory and lowering markdown levels which will take place in fiscal 2026 (CY 2025). This will be followed by the second leg which will include elevating the marketing for the brand and leveraging fixed expenses. The first quarter showed nice progress on this trajectory with the brand comping +2.1% with strong regular price selling. Anthropologie remains focused on three expansion categories: warm weather, athleisure, and intimates and lounge. Management also sees opportunity in Home which had positive sales in 1Q. Finally, there is an opportunity to increase brand awareness at Nuuly (clothing rental business). The company plans to increase the sophistication and the depth of the brand marketing. The company is also increasing the growth at Free People, targeting to open 25 doors in 2025, on a base of 35 doors. In total, we expect these actions to generate top line growth, improve cash flow, margins, and earnings leading to significant stock appreciation over the next two years."

Urban Outfitters, Inc. (NASDAQ:URBN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 39 hedge fund portfolios held Urban Outfitters, Inc. (NASDAQ:URBN) at the end of the second quarter, up from 35 in the previous quarter. Urban Outfitters, Inc.’s (NASDAQ:URBN) sales increased by more than 11%, achieving a record of $1.5 billion in the second quarter of 2025. While we acknowledge the potential of Urban Outfitters, Inc. (NASDAQ:URBN) 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.

In another article, we covered Urban Outfitters, Inc. (NASDAQ:URBN) and shared the list of high-risk high-reward growth stocks to buy. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.