Wednesday, Guggenheim initiated coverage on Deckers Outdoor Corporation (NYSE: NYSE:DECK) with a Neutral rating, emphasizing the company’s current valuation. The firm has set its fiscal year 2025 and 2026 earnings per share (EPS) estimates for Deckers at $5.10 and $5.70, respectively. Deckers, known for its UGG and HOKA brands, has been recognized for its strong position in the omni-channel retail space within the footwear industry, focusing on direct-to-consumer (DTC) experiences.
Deckers' growth trajectory is acknowledged, particularly with its HOKA brand, which is anticipated to see about a 20% increase in sales over the next few years, potentially exceeding $2.5 billion by FY26.
This growth is supported by the brand's expansion in both domestic and international distribution and ongoing innovation. The UGG brand is also expected to maintain its relevance and achieve mid-single-digit percentage growth, propelled by Deckers' brand elevation strategy and a shift towards more DTC and full-price sales.
The analyst highlighted Deckers' impressive performance in the last decade, which has led to a notable expansion in its price-to-earnings (P/E) multiple, rising from a 10-year average of 17 times to a current forward P/E of 29 times for the calendar year 2025. Despite this growth, Guggenheim expressed difficulty in envisioning further significant multiple expansion for the company.
Deckers' enterprise value to forward EBITDA (EV/FWD EBITDA) is also at a premium compared to its peers in both Branded Footwear & Apparel and Activewear, with a ratio of 19 times versus an average of 10 and 13 times, respectively. Based on these metrics, Guggenheim suggests that Deckers' shares are fairly valued at present, indicating a balanced risk/reward profile for investors.
In other recent news, Deckers Outdoor Corporation has seen a series of strategic changes and significant growth. The company reported a robust 22% increase in Q1 FY2025 revenues, largely due to a 30% surge in revenue from the HOKA brand and a 14% rise from the UGG brand, prompting an upward revision of Deckers' annual profit forecast. Following a 6-for-1 stock split, analysts from Williams Trading and TD Cowen adjusted their price targets to reflect the new valuation.
However, Seaport Global Securities downgraded Deckers Outdoor shares from "Buy" to "Neutral" due to concerns about diminishing momentum for the HOKA and UGG brands. In contrast, UBS reiterated its Buy rating, maintaining a price target of $225.00, citing HOKA's rapid growth as a significant contributor to future sales and earnings.
Truist Securities also increased the stock price target for Deckers Outdoor to $205.00, expressing confidence in the company's continued strong performance. Meanwhile, Evercore ISI revised its price target for shares of Deckers Outdoor to $183.00 but maintained an Outperform rating, indicating confidence in the company's future performance.
Finally, Stefano Caroti is set to take over as the new CEO of Deckers Outdoor Corporation as the company continues to experience growth and strategic changes.
InvestingPro Insights
Recent data from InvestingPro adds depth to Guggenheim's analysis of Deckers Outdoor Corporation (NYSE: DECK). The company's market capitalization stands at $24.69 billion, reflecting its significant presence in the footwear industry. Deckers' P/E ratio of 30.74 aligns closely with Guggenheim's observation of a forward P/E of 29 times for the calendar year 2025, indicating a premium valuation.
InvestingPro Tips highlight that Deckers is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.55 for the last twelve months as of Q1 2025. This suggests potential undervaluation when considering the company's growth prospects, particularly with the HOKA brand's expected 20% sales increase.
The company's strong financial position is evident from InvestingPro data, showing a revenue of $4.44 billion and an impressive revenue growth of 20.3% for the last twelve months as of Q1 2025. This robust performance supports Guggenheim's positive outlook on Deckers' growth trajectory.
For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for Deckers Outdoor Corporation, providing a deeper understanding of the company's financial health and market position.
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