On Friday, Stifel, a financial services firm, raised its price target on Deckers Outdoor Corporation (NYSE: NYSE:DECK) shares to $887.00 from the previous $825.00. The firm has maintained a Hold rating on the stock.
Deckers Outdoor's first-quarter financial results have been characterized as a solid beginning to the fiscal year, with the company's direct-to-consumer (DTC) business for its HOKA brand showing a significant pickup.
The growth for HOKA's DTC segment was reported at 33%, an increase from 21% in the fourth quarter of the previous fiscal year and slightly below the 38% growth in the third quarter.
The company's reiteration of its revenue guidance has been perceived as conservative by Stifel. Stefano Caroti is set to take over as CEO on August 1, 2024, and will be facing high expectations as reflected by the stock's 30X price-to-earnings (P/E) multiple on the upper range of the forecast for fiscal year 2025 earnings per share (EPS).
HOKA's growth rates are considered crucial to the stock's valuation, especially given the premium typically assigned to performance brands. Approaching a $2 billion run rate, HOKA's continued expansion is expected to drive the company's valuation. Stifel's analysis suggests that the market is anticipating a growth rate of over 25% for HOKA, translating to an increase of more than $500 million annually.
However, Stifel notes the challenge of maintaining such growth in a slowing consumer environment and a competitive performance running category. Despite the revised higher price target, Stifel's stance on Deckers Outdoor remains a Hold, indicating a cautious outlook on the stock's future performance.
In other recent news, Deckers Brands reported a significant increase in Q1 FY2025 revenues, boasting a 22% growth to $825 million. This growth was mainly driven by the company's HOKA brand, which saw a 30% surge in revenue to $545 million, and UGG which reported a 14% rise to $223 million.
Deckers' updated outlook for the fiscal year suggests a continued trajectory of increased profitability, with an anticipated total company revenue growth of approximately 10% and a gross margin around 54%.
The company's international revenue also grew by 21%, with strong direct-to-consumer sales. Deckers Brands is focusing on innovation and brand building, particularly for HOKA and UGG brands. The company's CEO, Dave Powers, expressed confidence in brand momentum and achieving updated guidance.
However, the company expects growth to slow down in the remaining quarters, with Q1 being the strongest. Mergers and acquisitions are not a current focus as the company prioritizes organic growth.
Share repurchases and dividend payments are under consideration. These are recent developments and reflect the company's ongoing efforts to maintain its robust performance and capitalize on its current market momentum.
InvestingPro Insights
Adding to the analysis provided by Stifel, real-time data from InvestingPro shows Deckers Outdoor Corporation (NYSE: DECK) holding a market capitalization of $21.38 billion. The company's P/E ratio stands at 28.57, reflecting a market valuation that may be considered demanding by some investors but potentially justified by its growth prospects. With a robust revenue growth of 18.21% over the last twelve months as of Q4 2024, Deckers Outdoor is demonstrating a strong capacity to increase its sales.
Two critical InvestingPro Tips for Deckers Outdoor include the fact that the company holds more cash than debt on its balance sheet, suggesting a strong financial position. Additionally, 8 analysts have revised their earnings upwards for the upcoming period, indicating a positive sentiment about the company's future performance. For investors looking for more in-depth analysis and additional InvestingPro Tips, there are 13 more tips available that could provide further insights into Deckers Outdoor's financial health and stock performance. Interested readers can find these tips by visiting https://www.investing.com/pro/DECK and using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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