Why Farfetch Stock Surged on Wednesday

What happened

In what’s becoming a frequent event, shares of Farfetch Limited (NYSE:FTCH), a luxury-fashion company headquartered in London, surged on Wednesday, hitting fresh all-time highs. As of 2:30 p.m. EST, the stock was up 6%, but it had been up 9% earlier in the day. Today it’s going up because an analyst raised their price target.

So what

Analyst Stephen Ju of Credit Suisse is upping his bullish outlook for Farfetch stock, according to The Fly. In his opinion, near-term results aren’t what investors need to be focusing on. Rather, he sees value in the company’s push into China, and it’s enough to motivate an increase in his price target. Before, his price target was set at $35 per share. Now, it’s been raised to $43 per share — about where currently trades.

A businesswoman draws an upward arrow over a bar chart displayed on a transparent touchscreen.

Image source: Getty Images.

Ju’s analysis comes on the heels of Farfetch’s newly announced joint venture in China with Alibaba Group Holding and Richemont. Farfetch stock has actually spiked a couple of times now with this news: once when rumors of the deal started, and once more when the rumor was confirmed by the involved companies. All told, the stock is up over 60% over the last few weeks.

Now what

Farfetch stock is now trading at Ju’s price target, but that doesn’t mean there can’t be more upside. Price targets normally only look a short period ahead — perhaps a year. But when investing in stocks, a longer holding period allows more time for companies to compound shareholder value. Of course, more thorough research is needed to determine which companies will be able to do this.

The point is, Farfetch stock may have already reached Ju’s price target, but that isn’t a good indication of where it’s headed over the next several years.

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