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Birkenstock shares rated Outperform as DTC and wholesale segments show acceleration

Published 19/12/2024, 18:34
Birkenstock shares rated Outperform as DTC and wholesale segments show acceleration
BIRK
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On Thursday, BMO Capital Markets updated its outlook on Birkenstock Holding plc (NYSE:BIRK), increasing the footwear company’s price target from $60.00 to $70.00. The firm maintained its Outperform rating on the stock, citing robust fourth-quarter performance and positive future guidance. According to InvestingPro data, Birkenstock currently commands a market capitalization of $10.7 billion and trades at a P/E ratio of 52.3x, suggesting premium market positioning.

Birkenstock’s fourth quarter showcased accelerated growth in both direct-to-consumer (DTC) and wholesale channels across various regions. The company achieved impressive revenue growth of 21% over the last twelve months, with total revenue reaching $2 billion. Despite a year-over-year contraction in gross margins (GM), BMO Capital noted an approximate 10 basis point expansion in underlying GM. Additionally, the company’s adjusted EBITDA margin surpassed expectations, with EBITDA reaching $604 million.

For the fiscal year, Birkenstock’s management has projected currency constant (CC) revenue growth of 15-17%. Gross margins are anticipated to approach the long-term target of around 60%, with adjusted EBITDA margins estimated between 30.8% and 31.3%. InvestingPro analysis reveals 13 key investment tips for Birkenstock, including strong earnings growth potential and impressive profitability metrics.

The management team also reaffirmed their medium to long-term objectives, aiming for mid to high-teens sales growth and gross margins/adjusted EBITDA of approximately 60% and over 30%, respectively.

The analyst highlighted Birkenstock’s potential for continued industry-leading growth at strong margins, alongside an improving balance sheet and deleveraging efforts. Current financials support this outlook, with a healthy current ratio of 2.6 and moderate debt levels. The revised $70.00 price target is based on an approximate 30 times multiple of the company’s projected fiscal year 2026 earnings.

In other recent news, Birkenstock Holding plc surpassed market expectations with its fourth-quarter results, exhibiting robust growth, particularly in its business-to-business segment, which was primarily fueled by the U.S. market.

Bernstein, a financial services firm, expects the negative impact on Birkenstock’s gross margins from the company’s capacity expansion to lessen by the third quarter of 2026. Several analyst upgrades have been reported, with Baird raising its price target to $72, and Stifel, BTIG, and Williams Trading all raising their price targets to $70 and $73 respectively, citing strong growth and a positive future outlook.

These recent developments follow Birkenstock’s impressive financial performance, including stronger than expected fourth-quarter revenue. The company’s business strategy was praised for its effectiveness, and the company’s fiscal year 2025 guidance was deemed conservative in light of the current performance metrics. The strength of Birkenstock’s business was further underscored by a rise in the number of pairs sold and an increase in average selling prices.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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