Piper Sandler has maintained a Neutral rating on Deckers Outdoor (NYSE: NYSE:DECK), with a steady price target of $166.00.
The firm's analyst highlighted concerns ahead of the company's second-quarter fiscal year 2025 earnings report, set for release after the market closes on October 24, 2024.
Deckers' stock has recently seen a pullback amid investor worries about the UGG brand's performance in direct-to-consumer (DTC) sales, which faces a challenging comparison from the same quarter in the previous year.
The analyst adjusted UGG sales estimates slightly downward to a 2% increase from a prior 4%, with the consensus at 3%. This revision is due to a more moderate projection for DTC sales, now estimated at a 1% increase, considering the tough comparison from two years prior.
In contrast, expectations for the HOKA brand remain positive, with an anticipated outperformance against the Street's estimate of a 23% rise, supported by factors such as comparable sales, expansion into new stores like JD (NASDAQ:JD) Sports and Foot Locker (NYSE:FL), and consistently strong market checks indicating limited discounting.
In other recent news, Deckers Outdoor Corporation has experienced significant developments in earnings and revenue results. The company reported a robust 22% increase in Q1 FY2025 revenues, largely due to a 30% surge in revenue from the HOKA brand and a 14% rise from the UGG brand.
This led to an upward revision of Deckers' annual profit forecast. The company also underwent a 6-for-1 stock split, a move endorsed by analysts from Williams Trading and TD Cowen, who adjusted their price targets to reflect the new valuation.
Analyst firms Piper Sandler and Evercore ISI maintained neutral and outperform ratings on Deckers Outdoor shares, respectively, with Piper Sandler expressing concerns about the UGG brand's performance in direct-to-consumer channels. Citi and TD Cowen also maintained neutral and buy ratings, respectively, with both firms highlighting the strength of the HOKA brand. However, Seaport Global Securities downgraded Deckers from "Buy" to "Neutral", expressing concerns about diminishing momentum for the HOKA and UGG brands.
InvestingPro Insights
As Deckers Outdoor (NYSE: DECK) approaches its Q2 FY2025 earnings report, InvestingPro data provides additional context to the analyst's outlook. The company's revenue growth remains robust, with a 20.3% increase over the last twelve months and a 22.13% quarterly growth in Q1 2025. This aligns with the analyst's positive expectations for the HOKA brand.
Deckers' profitability is also noteworthy, with a gross profit margin of 56.54% and an operating income margin of 22.51% over the last twelve months. These strong margins support the analyst's suggestion that the company could outperform on gross margins.
InvestingPro Tips highlight that Deckers is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.55. This could indicate potential upside if the company meets or exceeds earnings expectations, as the analyst suggests it might.
For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for Deckers Outdoor, providing a deeper understanding of the company's financial health and market position.
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