On Wednesday, Deutsche Bank resumed coverage on Skechers USA (NYSE:SKX), assigning a Buy rating to the stock with a price target of $82.00. The firm emphasizes the brand's strength and potential for revenue growth, suggesting that the current market valuation does not fully reflect these factors.
The analyst from Deutsche Bank pointed out that Skechers has nearly doubled its sales over the past five years and is poised for sustained double-digit top-line growth. Despite this performance, the shares are trading at a significant discount—14.8 times the next twelve months (NTM) consensus price-to-earnings (P/E) ratio, which is 25% lower than its industry peers.
Deutsche Bank is projecting a high-teens earnings per share (EPS) compound annual growth rate (CAGR) through 2026 for Skechers. The optimism is partly based on the company's potential to capitalize on international expansion, a robust direct-to-consumer (DTC) business, and improved profit margins resulting from strategic product placement and supply chain efficiencies.
The bank also noted Skechers' unique market position, offering value in a highly competitive and fragmented premium footwear market. This positioning is expected to insulate the brand as consumer preferences shift towards comfortable footwear. Additionally, Skechers' foray into new product categories like football and basketball is anticipated to enhance the brand's reputation and demonstrate its ability to compete in the performance athletic space.
In summary, Deutsche Bank's outlook for Skechers is positive, highlighting the company's strategic initiatives and market positioning as key drivers for growth and a re-rating of its stock value.
In other recent news, Skechers USA Inc . has reported a record-breaking first quarter in 2024, with sales reaching $2.25 billion, a 12.5% increase from the previous year. The company's gross margin improved to 52.5%, and the operating margin reached 13.3%. As part of its expansion strategy, Skechers opened 52 new company-owned stores and 95 third-party stores in the first quarter, with plans to open between 155 to 170 new stores in 2024.
Wells Fargo initiated coverage on Skechers with an Overweight rating and set a price target of $83.00, highlighting the company's strong revenue and earnings per share growth prospects. The firm expects Skechers to achieve a 20% compound annual growth rate in earnings per share over the next three years.
In addition, UBS maintained its Buy rating on Skechers, setting a price target of $88.00, with the footwear company projected to reach $10 billion in revenue by 2026. Analysts at UBS predict a compound annual growth rate of approximately 15% in earnings per share over the next five years.
Simultaneously, BofA Securities upgraded Skechers' stock from Neutral to Buy, raising the price target to $87.00, influenced by an improving wholesale environment and stronger footwear trends. These are the latest developments shaping Skechers' financial landscape.
InvestingPro Insights
Adding to the analysis by Deutsche Bank, real-time data from InvestingPro provides a deeper dive into Skechers USA's financial health. The company is currently trading at a P/E ratio of 19.41, which is considered low relative to its near-term earnings growth, indicating a potential undervaluation. With a PEG ratio for the last twelve months as of Q1 2024 at just 0.43, Skechers demonstrates a promising balance between its earnings growth rate and its P/E ratio, suggesting that the stock may be a compelling growth-at-a-reasonable-price (GARP) investment.
InvestingPro Tips reveal that Skechers' liquid assets exceed its short-term obligations, providing financial stability and flexibility. Additionally, while the stock is trading near its 52-week high, with a price 99.21% of that peak, it has shown strong returns over the last three months, with a 20.57% price total return. Moreover, analysts predict the company will be profitable this year, which aligns with the positive revenue growth of 8.17% and a robust gross profit margin of 52.79% over the last twelve months as of Q1 2024.
For investors interested in further insights and metrics, there are additional InvestingPro Tips available for Skechers, which can be found at https://www.investing.com/pro/SKX. To enrich your investment decision-making process, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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