On Friday, Stifel maintained its Hold rating on Deckers Outdoor (NYSE:DECK) but increased the company's price target to $825 from $775. This adjustment follows Deckers' recent financial performance, which showcased a strong upside in the fourth fiscal quarter.
The company's guidance for fiscal year 2025 suggests a conservative stance, with expected EBITDA to remain roughly flat year over year. Despite this forecast, the initial guidance for fiscal year 2024 was significantly surpassed in both revenue and earnings per share (EPS), ending 9% and 35% higher, respectively.
The firm acknowledges Deckers' solid execution but expresses caution regarding the sustainability of the stock's valuation, which currently exceeds 30 times the guided EPS and 20 times the implied forward EBITDA. The growth trajectory of the HOKA brand is deemed crucial to the company's valuation. While the HOKA guidance anticipates a 20% increase, consistent with market expectations, a slowdown in direct-to-consumer (DTC) sales in the fourth quarter is a point of focus for the brand's potential.
Looking ahead, the revenue and adjusted EBITDA projections for fiscal years 2025 and 2026 remain largely unaltered. However, the EPS forecast has been adjusted upward due to a lower anticipated tax rate and the effects of share repurchases. Despite the possibility of future upward revisions for fiscal year 2025, Stifel's stance reflects a cautious approach to valuation. The firm concludes by reiterating a Hold rating for Deckers Outdoor, with an updated 12-month price target of $825.
InvestingPro Insights
Deckers Outdoor's financial resilience is underscored by a balance sheet where cash holdings surpass debt levels, a reassuring sign for investors focused on financial stability. This is further complemented by the fact that analysts have recently adjusted their earnings expectations upwards for the upcoming period, indicating potential confidence in the company's performance prospects. Additionally, Deckers has demonstrated an ability to cover interest payments comfortably with its cash flows, an important metric for assessing a company's financial health.
On the valuation front, Deckers is trading at a P/E ratio of 32.49, reflecting investor sentiment on its earnings capacity. The company's revenue growth over the last twelve months stands at an impressive 15.34%, showcasing its ability to expand its financial top line. Moreover, with a significant 105.45% one-year price total return, Deckers has rewarded investors handsomely. Investors seeking more comprehensive insights can find additional InvestingPro Tips at https://www.investing.com/pro/DECK, which include 16 more tips that could provide a deeper understanding of the company's investment potential. To enhance your investing toolkit, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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