Deckers Outdoor stock poised for growth with FY guidance likely too cautious

On Monday, TD Cowen maintained its buy rating on shares of Deckers Outdoor (NYSE:DECK), with a steady price target of $176.00. The firm underscored the strong performance of HOKA, a brand under Deckers Outdoor, noting its pricing power in the athletic apparel and footwear market. Despite the competitive landscape, with accelerating data for key competitors, the analyst believes that the current financial guidance provided by Deckers may be too conservative, given HOKA's pricing and sell-through rates.

The report also mentioned stability in another Deckers brand, lululemon (NASDAQ:LULU), which is holding its own in the market. The commentary comes amidst a backdrop where competitors are showing accelerated growth, yet Deckers brands like HOKA and lululemon appear to be maintaining their market positions effectively.

Additionally, the analyst pointed out that recent remarks from Skechers regarding its business in China are not expected to significantly alter consensus earnings per share (EPS) estimates. This suggests that the market has likely already priced in the potential impact of Skechers' China operations on the broader industry and on Deckers Outdoor's performance.

Deckers Outdoor's stock rating remains unchanged, as the analysis suggests confidence in the company's brand strength and market strategy. The $176 price target indicates a belief in the potential for the stock to grow and reflects an optimistic outlook on the company's financial prospects.

In other recent news, Deckers Outdoor Corporation has experienced significant growth and strategic changes. The company's Q1 FY2025 revenues saw a robust 22% increase, reaching $825 million, primarily driven by a 30% surge in revenue from the HOKA brand and a 14% rise from the UGG brand. As a result, Deckers' annual profit forecast has been revised upwards.

Deckers has also undergone a 6-for-1 stock split, a move well-received by analysts from firms such as Williams Trading and TD Cowen, who adjusted their price targets to reflect the new valuation. Despite a decrease in their fiscal year 2025 and 2026 earnings per share estimates, analysts continue to express confidence in Deckers, citing strong demand for its UGG and HOKA brands.

BofA Securities maintained a neutral stance on Deckers shares, highlighting a positive outlook on the growth potential for HOKA. The company is set to expand its presence in big box retailers, including names like Dick's Sporting Goods (NYSE:DKS), Foot Locker (NYSE:FL), and JD (NASDAQ:JD) Sports.

Investment firms Baird, Truist Securities, and TD Cowen have raised their price targets for Deckers, indicating a positive outlook. Deckers' new CEO, Stefano Caroti, is set to take over leadership, and retailers are adjusting their inventory strategies to accommodate more HOKA and UGG products.

InvestingPro Insights

Adding to the optimism from TD Cowen's analysis, Deckers Outdoor (NYSE:DECK) shows promising financial health and growth potential according to recent InvestingPro data. The company's market capitalization stands at a robust $22.98 billion, and it is trading at a P/E ratio of 28.81, which adjusts to 28.06 on a last twelve months basis as of Q1 2023. This valuation comes in light of a substantial revenue growth of 20.3% over the last twelve months leading up to Q1 2023, outpacing the quarterly growth rate of 22.13% for Q1 2023.

Furthermore, Deckers Outdoor's EBITDA growth is notably strong at 47.89% for the same period, highlighting efficient operations and profitability. An InvestingPro Tip worth noting is that Deckers holds more cash than debt on its balance sheet, which is a reassuring sign of financial stability. Additionally, the company's cash flows are robust enough to sufficiently cover interest payments, which is another positive indicator for investors considering the stock.

For those seeking more detailed analysis, there are over 10 additional InvestingPro Tips available, including insights on Deckers Outdoor's valuation multiples and profitability forecasts. Investors can explore these tips to gain a more comprehensive understanding of the company's financial outlook and investment potential.

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