Citi maintains buy on Birkenstock with $65 target

On Tuesday, Citi reiterated its Buy rating on Birkenstock Holding plc (NYSE: NYSE:BIRK) with a steady price target of $65.00. The firm's analysis anticipates that the company's third-quarter earnings per share, which will be announced before the market opens on August 29, will surpass the consensus due to stronger sales and gross margins.

The projected growth is expected to be widespread across various regions. In the Americas, which is Birkenstock's most mature market, the company is likely to benefit from strong brand popularity and increased shelf space.

Additionally, significant growth is anticipated in the Asia-Pacific and Middle East Africa (APMA) region, where new factory capacities are enabling Birkenstock to better meet demand, a critical factor for long-term growth.

Despite some pressure on gross margins this year due to the ramp-up of the Pasewalk factory and foreign exchange challenges, the firm believes that the underlying business health of Birkenstock is robust, indicated by minimal promotions and the potential for pricing opportunities.

With Birkenstock having good visibility into the fourth quarter, as the report comes two-thirds into Q4, management is expected to increase its full-year 2024 constant currency sales guidance from a 20% increase to over 21%. Furthermore, the EBITDA guidance is projected to rise from €535-545 million to $550-$555 million.

Citi's analysis underscores that while Birkenstock has remained one of its top three picks for several quarters, the market has high expectations leading into the third-quarter earnings, suggesting a balanced situation as the earnings report approaches.

In other recent news, Birkenstock Holding plc has been the subject of significant financial developments. The company released 14 million shares in a secondary offering, with no dilution of existing shareholders' equity, and continues to project sales growth of over 20% and an EBITDA range of €535 to €545 million for fiscal year 2024.

Jefferies maintained a Buy rating with a steady stock price target of $75.00, while Goldman Sachs adjusted its price target to $59.50, maintaining a neutral stance. Deutsche Bank resumed coverage with a 'Buy' rating and a price target of $70.00, and UBS upgraded Birkenstock from 'Neutral' to 'Buy', increasing the price target to $85.00.

InvestingPro Insights

As Birkenstock Holding plc (NYSE: BIRK) prepares to release its third-quarter earnings, a look at the company's performance through InvestingPro's lens reveals some interesting insights that align with Citi's positive outlook. With a market capitalization of $11.64 billion, Birkenstock is trading at a high earnings multiple of 130.46, which is indicative of high market expectations and investor confidence in the company's growth prospects. This optimism is supported by a robust gross profit margin of 60.85% over the last twelve months as of Q2 2024, showcasing the company's ability to maintain profitability amid cost pressures.

InvestingPro Tips further bolster the case for Birkenstock's strength, highlighting the company's impressive gross profit margins and the expectation of net income growth this year. These factors, combined with a strong return over the last year, provide a solid backdrop for the upcoming earnings announcement. It's noteworthy that Birkenstock's liquid assets exceed short-term obligations, indicating a healthy liquidity position that could support ongoing operations and strategic initiatives.

For investors seeking a deeper dive into Birkenstock's financial health and future outlook, InvestingPro offers an additional 16 tips on their platform, including insights into valuation multiples and profitability predictions for the year. With the next earnings date set for August 29, these insights could be invaluable for those looking to make informed decisions about their investments in Birkenstock.

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