Deckers shares outlook strong with Hoka expected to deliver 21% 5-year sales CAGR

Monday, shares of Deckers Outdoor Corporation (NYSE:DECK) continued to be in focus as UBS analyst reiterated a Buy rating and a $232.00 price target for the company. The stock has demonstrated remarkable momentum, surging 85.91% over the past year and trading near its 52-week high of $214.70.

The optimism from UBS is largely due to the performance and growth potential of Deckers' footwear brand, Hoka. The analyst highlighted Hoka as one of the world's fastest-growing footwear brands and anticipates that its momentum with consumers will result in robust sales growth and earnings that exceed expectations.

According to UBS, the strength of Deckers' sales and earnings per share (EPS) growth outlook warrants a price-to-earnings (P/E) ratio of approximately 30 times. The company currently trades at a P/E of 36.26, reflecting investor optimism about its growth prospects. UBS has forecasted a 21% five-year compound annual growth rate (CAGR) in sales for Hoka, which is expected to be the primary driver behind the company's projected 16% five-year EPS CAGR. According to InvestingPro, the company's revenue is already growing at an impressive 19.25% rate.

The analyst also expects that investor sentiment will remain positive as Deckers demonstrates its ability to sustain a high EPS growth rate. Data from UBS Evidence Lab's 10th annual global athletic wear survey provided additional support for the bullish stance, indicating that Hoka has significant growth potential.

The survey showed that Hoka's global aided brand awareness is at 14%, which is substantially lower than established brands such as Nike (NYSE:NKE), Puma (OTC:PMMAF), and Jordan. However, Hoka's brand awareness has been increasing rapidly, climbing from 4% in 2021 to 14% in the current year. For deeper insights into Deckers' growth metrics and financial health (rated as GREAT by InvestingPro), investors can access the comprehensive Pro Research Report, available exclusively to subscribers.

UBS analysis suggests that Hoka's rising brand awareness is a critical factor for the brand's potential to capture more market share in the coming year. This growth trajectory is expected to contribute positively to Deckers' overall performance, as the company leverages Hoka's expanding consumer recognition and market presence.

With strong financial metrics including a healthy current ratio of 3.08 and robust return on equity of 44%, InvestingPro data suggests the company is well-positioned to execute its growth strategy. Investors can track the company's progress with its next earnings report scheduled for January 30, 2025.

In other recent news, Deckers Outdoor, known for its UGG and HOKA brands, has seen a significant increase in quarterly sales, with HOKA achieving record-breaking revenue. The company also exceeded forecasts in gross margin, largely due to an emphasis on higher-margin sales within its UGG and HOKA brands. Following these results, Deckers revised its full-year outlook upwards.

Several analyst firms have responded positively to these developments. Needham initiated coverage on Deckers Outdoor with a Buy rating and a price target of $218.00, citing the company's strong performance history and effective management team. Truist Securities revised its price target for Deckers Outdoor upwards, attributing this to the strong performance of Deckers Outdoor's HOKA brand and the rapid sellouts of the UGG brand during the holiday season. Telsey Advisory Group and TD Cowen also increased their price targets for Deckers Outdoor in response to the company's impressive financial performance.

Despite the positive trends, Citi maintained a more cautious stance due to valuation concerns.

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