UBS Talks Underpin Positive Outlook for Decker’s Outdoor Stock, Led by Hoka in Footwear Market From Investing.com

On Friday, UBS reiterated its Buy rating on shares of Deckers Outdoor (NYSE:NYSE:) and maintained a price target of $225.00. The bank’s positive assessment is based on the continued rapid growth of Deckers’ Hoka shoe brand. UBS predicts that Hoka’s expansion will be a key factor in Deckers’ future sales and profit performance.

The UBS analyst highlighted Hoka as one of the world’s fastest-growing footwear brands and expects it to maintain its strong momentum with consumers. This consumer demand is expected to drive significant revenue growth in fiscal 2025 and contribute to earnings that exceed expectations. Hoka is forecast to have a five-year compound annual growth rate (CAGR) in revenue of 20%, which is seen as the key driver of Deckers’ estimated 15% CAGR in earnings per share (EPS) over five years.

The bank’s analysis suggested that Deckers’ robust EPS growth outlook warrants a valuation of around 30 times price-to-earnings (P/E) ratio. Market sentiment is expected to remain positive towards Deckers as the company demonstrates its ability to maintain high revenue and EPS growth rates.

To support this optimistic outlook, UBS points to recent discussions with Hoka’s senior director of product, performance footwear and Deckers’ investor relations team. This meeting took place at the UBS Athletic Training and Lifestyle Innovation Day in Boston and reinforced the bank’s confidence in Deckers’ growth trajectory.

In other recent news, Deckers Outdoor experienced significant growth and strategic changes. The company’s first quarter fiscal 2025 revenue increased a significant 22% to $825 million, driven primarily by a 30% increase in sales from the HOKA brand and a 14% increase from the UGG brand. Unfortunately, Deckers’ annual profit forecast has been revised upwards.

Deckers also conducted a 6-for-1 stock split, a move that was well received by analysts at firms such as Williams Trading and TD Cowen. They adjust their price targets according to the new valuation. Investment firms such as Baird, Truist Securities and TD Cowen have raised their price targets on Deckers, indicating a positive outlook. The company’s new CEO, Stefano Caroti, is close to taking over. Retailers are adjusting their inventory strategies to include more HOKA and UGG products.

InvestingPro Insights

While UBS maintains a bullish stance on Deckers Outdoor (NYSE: DECK), key metrics and InvestingPro tips provide additional context for investors. Deckers has a strong financial position with more cash than debt on its balance sheet, which could provide resilience and flexibility in its operations. The company trades at a P/E ratio of 29.94, which is considered low relative to near-term earnings growth and suggests potential undervaluation given its growth prospects.

With robust revenue growth of 20.3% over the trailing twelve months through the first quarter of 2023, Deckers is demonstrating the kind of revenue expansion that UBS expects. Additionally, the company’s gross margin stands at an impressive 56.54%, highlighting its ability to maintain profitability amidst growth. Also worth noting, Deckers delivered a high return last year, with a total share price return of 88.12%, reflecting investor confidence and strong market performance.

Investors seeking more in-depth analysis can find additional InvestingPro tips that provide insights into Deckers’ ability to cover interest payments with its cash flows and the fact that its liquid assets exceed its short-term liabilities. There are 13 additional tips available on InvestingPro that provide a comprehensive understanding of Deckers’ financial health and potential investment value.

The InvestingPro fair value estimate is $124.24, compared to the analyst target of $180, providing a conservative perspective on the company’s valuation. As its next earnings date approaches on 10/24/2024, investors will be watching closely to see whether Deckers can continue to meet or exceed market expectations, particularly in relation to the performance of its Hoka brand.

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