On Friday, Citi reiterated its Buy rating on Birkenstock Holding plc (NYSE:BIRK) stock, maintaining a $55.00 price target. The firm anticipates a positive second-quarter earnings report before the market opens on May 30, 2024, driven by stronger sales and gross margins (GM).
The growth is expected to be broad-based across regions, with particular strength in the Americas, Birkenstock's most mature market. This region is benefitting from strong brand appeal, solid demand for closed-toe styles, and increased shelf space with key retailers.
Citi forecasts exceptional growth in the Asia-Pacific and Middle East Africa (APMA) region, where new factory capacity is helping Birkenstock better meet demand, a critical factor for long-term growth.
Despite the challenges of inflation and the impact of currency exchange rates coupled with the costs associated with ramping up the new factory, the firm believes the overall business health remains robust. This is evidenced by minimal promotions, indicating strong demand for Birkenstock's products.
The financial institution also expects Birkenstock's management to revise its fiscal year 2024 sales guidance upwards, from an increase of 17-18% to 18-19%.
Furthermore, EBITDA guidance is projected to rise from €520-530 million to €525-535 million. Citi's outlook is based on the company's ability to use pricing strategies to offset inflationary pressures effectively.
The analyst notes that with short interest standing at 21% of the float, one of the highest in Citi's coverage universe, and no signs of slowing momentum in the business, the setup heading into the second quarter earnings report appears favorable. This suggests a potential for a positive market reaction if Birkenstock's financial results meet or exceed expectations.
InvestingPro Insights
As Birkenstock Holding plc (NYSE:BIRK) approaches its second-quarter earnings report, a snapshot of the company's financial health and market performance can be gleaned from InvestingPro's real-time data. With a market capitalization of $8.69 billion and a high price-to-earnings (P/E) ratio of 101.15, Birkenstock is trading at a premium, reflecting investor confidence in its growth prospects. This is further supported by the company's impressive gross profit margin of 61.91% for the last twelve months as of Q1 2024, showcasing its efficiency in managing production costs and maximizing profitability.
InvestingPro Tips highlight that Birkenstock is expected to see net income growth this year and maintains an advantageous position with its liquid assets surpassing short-term obligations. These factors, combined with the company's moderate level of debt, present a financially sound company poised for further growth. Additionally, analysts predict profitability for the year, reinforcing the positive sentiment echoed by Citi's buy rating. Investors interested in deeper analytical insights can explore further tips on Birkenstock, with 8 additional InvestingPro Tips available at https://www.investing.com/pro/BIRK. To access these insights, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.