On Thursday, Piper Sandler maintained a Neutral rating on shares of Deckers Outdoor (NYSE: NYSE:DECK), with a steady price target of $166.00. The firm's assessment comes ahead of the company's second fiscal quarter 2025 earnings report, which is set to be released after market close on October 24, 2024. The analyst cited concerns about the brand UGG's performance in direct-to-consumer (DTC) channels, where it faces a challenging comparison from the previous year.
Deckers Outdoor's stock has experienced a decline due to investor worries over UGG's capability to match its prior year's performance in the second fiscal quarter, particularly in DTC sales. The two-year stack in DTC is noted to be significantly more challenging, with a 55-point sequential increase, while wholesale comparisons are also tough but less so, at a 38% increase on a two-year basis.
The firm has adjusted its UGG sales estimate to a 2% increase from the previously projected 4%, with the consensus at 3%. This revision is based on expectations of a more moderate performance in DTC sales due to the difficult comparison.
Despite this, HOKA, another brand under Deckers Outdoor, is expected to outperform the Street's estimate of a 23% increase, driven by comparable year-over-year growth, new retail partnerships, and positive market checks indicating limited discounting.
Piper Sandler anticipates that Deckers Outdoor could post a slight beat in sales and a more significant beat in earnings per share (EPS). The company has a history of surpassing EPS estimates, having beaten them by an average of 40% over the last four quarters. The analyst suggests that if this trend continues, it would likely be received well by the market.
In other recent news, Deckers Outdoor Corporation has seen a surge in Q1 FY2025 revenues by 22%, largely due to a 30% increase in revenue from the HOKA brand and a 14% rise from the UGG brand, leading to an upward revision of the company's annual profit forecast. This positive financial performance has led to a series of analyst upgrades.
Evercore ISI raised Deckers Outdoor's stock target to $185, maintaining an Outperform rating, while UBS increased the price target to $226, keeping a Buy rating. Conversely, Seaport Global Securities downgraded Deckers from "Buy" to "Neutral," citing concerns about diminishing momentum for the HOKA and UGG brands.
Deckers Outdoor 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. Analysts from TD Cowen and Truist Securities have expressed confidence in the company's continued strong performance, adjusting their price targets accordingly.
However, Citi maintained a Neutral rating on Deckers Outdoor shares but increased the price target to $170 from $163, reflecting expectations of a strong second-quarter performance, primarily driven by robust sales from the company's Hoka brand.
In other developments, Guggenheim initiated coverage on Deckers with a neutral rating, citing the company's current valuation and anticipating a 20% increase in sales over the next few years for its HOKA brand. These are recent developments in the company's trajectory, and investors are advised to monitor these situations closely.
InvestingPro Insights
As Deckers Outdoor (NYSE: DECK) approaches its Q2 2025 earnings report, InvestingPro data provides additional context to Piper Sandler's analysis. Despite concerns about UGG's performance, DECK's financials show strength in several areas. The company's revenue growth of 20.3% over the last twelve months and a robust 22.13% quarterly growth indicate strong overall performance, potentially offsetting any weakness in UGG's DTC channels.
InvestingPro Tips highlight that DECK is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.55. This suggests the stock may be undervalued considering its growth prospects, which could be favorable if the company beats earnings estimates as Piper Sandler anticipates.
Moreover, DECK's strong financial position is evident from its high return over the last year, with a one-year price total return of 86.34%. This aligns with the InvestingPro Tip indicating DECK has been highly profitable over the last twelve months.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for DECK, providing a deeper understanding of the company's financial health and market position.
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