Shares of Deckers Outdoor were lowered amid weak product sentiment by Investing.com
On Monday, Seaport Global Securities modified their rating on shares of Deckers Outdoor Corporation (NYSE: NYSE: ), from a “Buy” rating to a “Neutral” rating. The downgrade reflects concerns about the declining momentum of the company's HOKA and UGG brands, which are expected to have less strength.
Deckers Outdoor did not provide guidance for the second quarter of the 2025 fiscal year, which appears to be a particularly challenging comparative period. The second quarter of last year, Q2 2024, saw significant growth due to a strong back-to-school season, with HOKA and UGG emerging as the leading brands. However, current trends show that these brands did not maintain the same level of momentum in the United States during this year's back-to-school season.
The analyst pointed out that although HOKA has become the leading brand in the specialty running market, competitors such as Asics and Brooks are regaining market share. There are also emerging concerns about HOKA's growth prospects in the larger US retail segment. However, last year's strong performance is expected to contribute to the growth of key lifestyle accounts in the current financial year.
For UGG, Deckers Outdoor forecasts do not show significant growth for the remainder of FY25. UGG's recent growth has been driven by certain product lines, but demand for these appears to have waned. Despite this, Deckers Outdoor's wholesale results were boosted by better sales, resulting from strong sales from the previous year.
The analyst concluded that while the FY25 guidance is not overly ambitious, showing modest sales growth and narrowing margins, the previous optimism that supported the “Buy” rating is gone. The potential for UGG demand to increase as the holiday season approaches is admitted, but a strong current push will be needed for a more positive outlook.
In other recent news, Deckers Outdoor Corporation showed significant growth with a 22% increase in revenue for Q1 FY2025, largely driven by a 30% increase in revenue from the HOKA brand and a 14% increase in the UGG brand. This strong performance prompted an upward revision to Deckers' annual profit forecast. The company also had a 6-for-1 stock split, with analysts at Williams Trading and TD Cowen agreeing to adjust their price targets to reflect the new rating.
UBS, maintaining a target price of $225.00, reiterated its buy rating on Deckers, citing HOKA's rapid growth as a key contributor to future sales and earnings. BofA Securities maintained a neutral rating on Deckers shares, maintaining a target price of $170.00, and highlighted HOKA's growth potential.
Investment firms Baird, Truist Securities, and TD Cowen raised their price targets on Deckers, indicating a positive outlook. In addition, Evercore ISI revised its price target on Deckers to $183.00 following the stock split but maintained an Outperform rating, indicating confidence in the company's future performance.
With the strategic shift, Deckers is set to expand its presence at big box retailers, including Dick's Sporting Goods (NYSE: ), Foot Locker (NYSE: ), and JD (NASDAQ: ) Sports. Among these events, Stefano Caroti is expected to take over as the new CEO of Deckers Outdoor Corporation.
InvestingPro Insights
Despite Seaport Global Securities' downgrade, InvestingPro's data points to positive aspects of Deckers Outdoor Corporation's financial performance. The company's revenue growth stands at 20.3% in the last twelve months, with a significant growth of 22.13% for the quarter in Q1 2025. This strong growth is consistent with the strong performance mentioned in the article, especially for the HOKA and UGG brands.
InvestingPro Tip highlights that Deckers trades at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.56. This suggests that despite concerns about slowing momentum, the stock may still be undervalued considering its growth prospects.
Another relevant InvestingPro tip shows that Deckers has more cash than debt on its balance sheet, which could provide financial flexibility as the company navigates the challenging comparative period mentioned in the article.
For investors looking for a comprehensive analysis, InvestingPro offers 13 additional tips for Deckers Outdoor Corporation, providing a deeper understanding of the company's financial health and market conditions.
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