Deckers Outdoor Upgrade
Jefferies Upgrades Deckers Outdoor to Buy, Citing Strong Growth Prospects and Attractive Valuation
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Key Points
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HOKA is expected to rebound supported by a refreshed product lineup and finer segmentation of the range, which Jefferies views as reducing near-term growth concerns.
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UGG's international momentum is stronger than many investors recognize, with expansion in offerings underpinning durable growth abroad.
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Deckers carries a meaningful net cash position, equal to about 13% of its market capitalization, providing balance-sheet flexibility and downside protection.
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Jefferies notes the stock’s valuation has already priced in growth deceleration, with the price/earnings multiple compressing from around 33x previously to about 13x, addressing earlier margin-growth concerns.
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GuruFocus’ GF Value suggests DECK is significantly undervalued relative to intrinsic value, with GF Value around $151.58 and the stock trading roughly 30% below that level.
Jefferies upgraded Deckers Outdoor (DECK) to Buy from Hold on Monday, raising its price target to $130 from $110. The Wall Street firm says the stock has been "unfairly punished" and is now a compelling buy, according to TipRanks.
Deckers, the company behind UGG boots and Hoka sneakers, has fallen about 15% year-to-date. Jefferies argues that the sell-off has gone too far and that the stock's valuation already prices in slowing growth, per Yahoo Finance.
HOKA Slowdown Already Baked Into the Price
Jefferies says the market has "oversold" Deckers due to fears about HOKA's slowing growth. But the firm believes those fears are already reflected in the share price, according to Yahoo Finance. The stock's price-to-earnings multiple has compressed from about 33x to roughly 13x — a steep drop that Jefferies says more than accounts for the slowdown.
HOKA is expected to bounce back. Jefferies points to a refreshed product lineup and better segmentation of the brand's range as key drivers. These moves, the firm says, reduce near-term growth concerns and set the stage for a rebound.
UGG's International Growth Stronger Than Investors Think
While much attention has focused on HOKA, Jefferies argues that UGG's international momentum is stronger than most investors realize. The brand is expanding its product offerings abroad, which the firm says underpins durable, long-term growth outside the US market.
Management has guided for high-single-digit revenue growth and stable margins in the low-20% range. Deckers also plans to keep buying back its own shares. That said, EBIT growth — operating profit — is expected to slow compared to prior years, per Yahoo Finance.
Valuation Looks Cheap Versus Its Own History
Deckers currently trades at about 15.1x trailing earnings. Its five-year median is above 22x. That gap suggests the stock is historically cheap relative to where it has traded before, according to Yahoo Finance. Jefferies set its new $130 price target based on this valuation reset.
GuruFocus puts Deckers' intrinsic value — called GF Value — at around $151.58. With the stock trading roughly 30% below that level, the data firm flags DECK as significantly undervalued. The company also holds net cash equal to about 13% of its market cap, giving it a financial cushion and downside protection, per TipRanks.
What Comes Next Before the Earnings Report
Jefferies sees the period ahead of Deckers' next earnings report as a key window. The stock's recent weakness, the firm argues, creates an entry point before results can confirm the growth story. The upgrade signals that Jefferies believes the bad news is already in the price, according to TipRanks.
Not all analysts share Jefferies' optimism. Market commentary shows a mixed picture among Wall Street firms. But the combination of a strong cash position, a compressed valuation, and two durable brands gives Jefferies confidence that the risk-reward has shifted in buyers' favor, per Yahoo Finance.
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