On Wednesday, Truist Securities adjusted its stance on Deckers Outdoor Corporation (NYSE:DECK), downgrading the stock from Buy to Hold and reducing the stock price target to $864 from the previous $983.
The revision was prompted by a deceleration in direct-to-consumer growth for the company's HOKA brand, which began in mid-February and persisted through March. This slowdown led Truist Securities to revise its segment growth forecast down from approximately 40% to 25%.
The analyst from Truist Securities cited data from Truist Card that indicated while HOKA's growth has slowed, the UGG brand is performing strongly, leading to an increase in estimates for that segment. Despite the positive outlook for UGG, the recent market response to slowing growth trends has generally been unfavorable.
Deckers Outdoor's stock had experienced a significant rise of 39% since Truist Securities initiated coverage on November 16, 2023, outperforming the S&P 500's 15% increase during the same period. Still, with the stock currently trading at around 28 times forward twelve months earnings per share, the firm believes that the risk/reward profile for Deckers Outdoor is now balanced.
The downgrade reflects concerns about the growth trajectory of HOKA's direct-to-consumer channel, which is a key driver for Deckers Outdoor's business. Despite the downgrade, Truist Securities remains optimistic about HOKA's long-term potential. The new stock price target of $864, down from $983, takes into account the revised growth expectations and current market conditions.
InvestingPro Insights
Deckers Outdoor Corporation (NYSE:DECK) holds a strong financial position according to recent InvestingPro data, with a notable market capitalization of $20.72 billion. The company's P/E ratio, a measure of its current share price relative to its per-share earnings, stands at 28.83, indicating that investors are willing to pay a higher price for its earnings potential.
Moreover, Deckers has demonstrated a robust revenue growth of 15.34% over the last twelve months as of Q1 2023, underlining the company's ability to increase sales.
InvestingPro Tips highlight that Deckers maintains more cash than debt on its balance sheet, offering a degree of financial stability. Moreover, the company's cash flows can sufficiently cover interest payments, suggesting a healthy liquidity status. These financial strengths are complemented by a significant one-year price total return of 94.04%, reflecting investor confidence and market performance.
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