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Piper Sandler has assumed coverage on shares of Steven Madden (NASDAQ: NASDAQ:SHOO), issuing a Neutral rating and setting a price target of $45.00.
The firm highlighted the company's nimble business model, which permits rapid response to in-season trends, such as quickly supplying popular styles identified at a retail location to wholesale accounts within a short time frame.
The analyst pointed out that while Steven Madden's ability to adapt and meet demand is commendable, certain factors contribute to a cautious stance. These include the brand's significant exposure to the lower-income consumer demographic through its private label sales in mass channels, which are estimated to reach $370 million this year.
Additionally, the potential impact of store closures from key accounts like Macy's (NYSE:M) and possibly Dillard's (NYSE:DDS), as well as the risk associated with tariffs, with 79% of products being manufactured in China as of 2023, were noted as concerns.
The $45 price target is based on an 11 times multiple of the firm's projected 2025 EBITDA for Steven Madden, which represents a slight premium over the stock's historical average trading range of 9-10 times EBITDA during the 2022 and 2023 period.
This premium is attributed to the potential of the Almost Famous acquisition. The firm also provided a bull/bear range for the stock, suggesting it could vary between $50 and $35.
In another development, Steven Madden reported robust growth with an 18% rise in revenue and a 23% increase in adjusted diluted earnings per share (EPS) for the second quarter of 2024.
The company attributes this growth to its strategic expansion into international markets, diversification beyond footwear, and the bolstering of its U.S. wholesale footwear business.
Analysts from Telsey Advisory Group have adjusted their outlook on Steven Madden, raising the price target to $50 from $44, while maintaining a Market Perform rating. However, an analyst from Williams Trading has reduced the stock price target for Steven Madden to $39.00 from the previous $44.00, while keeping a Hold rating.
InvestingPro Insights
Piper Sandler's neutral stance on Steven Madden (NASDAQ: SHOO) is shared by several analysts, as reflected in recent revisions. According to InvestingPro Tips, 7 analysts have revised their earnings downwards for the upcoming period, signaling a consensus towards tempered expectations. This could be indicative of the challenges Steven Madden may face, including the exposure to lower-income consumers and tariff risks mentioned in the article.
Despite these concerns, Steven Madden's financial health appears robust with a market capitalization of $3.19 billion and a solid balance sheet, as the company holds more cash than debt. This is a critical metric for investors, especially in uncertain economic times, and it aligns with the company's nimble business model that allows for rapid inventory turnover. Moreover, Steven Madden's profitability over the last twelve months, with a gross profit margin of 41.4% and a return on assets of 13.88%, underscores the company's operational efficiency.
Moreover, Steven Madden's stock is currently trading at a high P/E ratio of 17.78, which is above the adjusted P/E ratio for the last twelve months as of Q2 2024 of 16.27. This suggests a premium on the company's earnings potential and growth, reflected in the 10.95% revenue growth over the same period. For investors considering the long-term value of Steven Madden, the InvestingPro product offers additional insights, including a total of 20 InvestingPro Tips that can further inform investment decisions.
Finally, while the stock has seen a 1-month price total return of -2.09%, the 1-year price total return of 31.52% demonstrates significant appreciation over a longer timeframe. This highlights the stock's resilience and potential for continued growth, aligning with the analyst's bull range of up to $50. For a more detailed analysis and additional tips, investors are encouraged to visit InvestingPro's dedicated page for Steven Madden at https://www.investing.com/pro/SHOO.
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