On Friday, Evercore ISI adjusted its price target for Skechers USA (NYSE:SKX), increasing it from $68.00 to $72.00, while reiterating an Outperform rating on the stock. The firm's stance remains positive despite acknowledging a mixed second-quarter performance for the footwear company, which faced challenges such as supply chain disruptions, regulatory hurdles, and foreign exchange (FX) headwinds.
The firm highlighted Skechers' consistent top-line growth and potential for expansion into new market categories, including pickleball and running, as key factors supporting the brand's growth prospects. These new ventures are expected to help Skechers' growth outpace the overall category.
According to the firm, Skechers is currently trading at 14 times the next twelve months (NTM) price-to-earnings (P/E), which is considered inexpensive relative to its three-year average P/E ratio of 15.5 times. The firm suggests that the current valuation presents an attractive entry point for investors.
Evercore ISI also noted some positive developments that could alleviate previous concerns, such as increased imports being allowed in India and a quicker flow of products to Asia from China. Additionally, easing FX headwinds is seen as a favorable change that could position Skechers for a stronger performance in the second half of the year.
The firm's maintained Outperform rating indicates a continued confidence in Skechers' ability to navigate through the earlier-mentioned challenges and capitalize on opportunities for growth as market conditions improve.
In other recent news, Skechers U.S.A., Inc. reported a 7.2% increase in Q2 sales, hitting a record $2.16 billion, driven by a rise in Direct-to-Consumer and Wholesale sales. Despite challenges such as the Suez Canal crisis and a sluggish market in China, the company's international and domestic sales surged. However, Skechers' net earnings decreased from the previous year's $152.8 million to $140.3 million due to a climb in operating expenses.
The company's Board of Directors authorized a new $1 billion share repurchase program, reflecting their confidence in its financial strength. For Q3 2024, Skechers anticipates sales between $2.30 and $2.35 billion and diluted earnings per share of $1.10 to $1.15.
In other developments, TD Cowen raised Skechers' price target from $77.00 to $79.00, maintaining a "Buy" rating, attributing this to the company's innovation cycle and competitive pricing strategy. Deutsche Bank, Wells Fargo, UBS, and BofA Securities also provided positive outlooks, setting price targets of $82, $83, $88, and $87 respectively.
In a significant move within the luxury retail sector, Saks Fifth Avenue's parent company, HBC, acquired competitor Neiman Marcus in a deal valued at $2.65 billion. This acquisition is expected to enhance the bargaining position of these high-end retailers, with tech giants Amazon (NASDAQ:AMZN) and Salesforce (NYSE:CRM) acquiring minority stakes.
These recent developments reflect the evolving landscape for both Skechers and the luxury retail sector.
InvestingPro Insights
Evercore ISI's recent price target increase for Skechers USA (NYSE:SKX) mirrors the optimism seen in the InvestingPro data. With a market capitalization of $9.72 billion and a trailing twelve-month P/E ratio of 16.35, Skechers stands out in the market. The company's P/E ratio, which is below the industry average, suggests that it is trading at a discount relative to its near-term earnings growth potential.
The company's stability is also highlighted by its low price volatility, making it a potentially attractive pick for investors looking for steady performers in their portfolio. Adding to the financial robustness, Skechers' liquid assets surpass their short-term obligations, indicating a solid liquidity position. Moreover, analysts have revised their earnings upwards for the upcoming period, underscoring confidence in the company's profitability prospects.
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