Rapid Decrease of 48%, Suggesting Attractive Purchase Opportunity for This Growth Stock
Deckers Outdoor Corporation, the footwear powerhouse behind iconic brands like UGG and HOKA, has reported strong first-quarter earnings, indicating a promising outlook for the stock. Despite recent struggles, the company is being viewed as a potential buying opportunity due to its robust brand portfolio, growth prospects, and positive analyst sentiment.
International sales accounted for nearly half of Deckers' revenue in the first quarter, growing an impressive 49.7% to $463.3 million. The company's performance outside the U.S., particularly in the Asia-Pacific and Europe, Middle East, and Africa (EMEA) regions, has been particularly strong.
One of the key factors contributing to this optimistic view is the solid performance of Deckers’ brands. Brands like HOKA and UGG have shown robust growth and outperformance relative to expectations, indicating resilience and strong consumer demand both internationally and in the U.S. The new Hoka Arahi 8 model, for instance, has achieved double-digit weekly sell-throughs since its launch in EMEA and significant volume gains in China.
Another factor is the attractive valuation and analyst targets. Although the stock price has dropped significantly, analysts maintain a bullish outlook, with an average 12-month price target around $137-$140. This discount reflects recent margin pressures and softer trends but may offer a value entry point.
Deckers' financials also paint a positive picture. The company reported growing revenue ($4.99 billion in 2024, up 16%) and earnings (up 27%), showing operational strength. The company also has a substantial stock repurchase program, having bought back 1.7 million shares recently with $2.4 billion remaining, which can support share price and signal management confidence.
Recent surges in trading volume and positive retail sector sentiment suggest renewed investor interest. However, sustained gains depend on upcoming earnings and product launches.
Deckers' focus on premium footwear and performance categories, including casual lifestyle and high-performance shoes, positions it well for enduring demand despite short-term challenges. This focus on premium segments tends to have strong pricing power and customer loyalty, which can help the company weather challenges like tariff costs and wholesale margin pressure.
In sum, despite near-term headwinds such as margin compression, elevated inventory, and softer direct-to-consumer trends affecting HOKA, the combination of resilient brands, consensus analyst buy ratings, growth in revenue and earnings, and capital return programs underpin Deckers Outdoor as a potential long-term growth investment with a favorable risk-reward profile at current valuations. The company's strong balance sheet, with no debt and $1.7 billion in cash, equivalent to about 10% of its market cap, further adds to its appeal.
Deckers' stock is trading at a price-to-earnings (P/E) ratio of 18, cheaper than many footwear and apparel sector peers and the S&P 500. The company is also actively buying back shares, reducing its shares outstanding by nearly 4 million over the last four quarters. In the most recent quarter, Deckers bought back 1.7 million shares, and it has $2.4 billion remaining under a repurchase authorization.
These factors suggest that Deckers Outdoor, despite its recent struggles, remains a compelling investment opportunity for those looking for long-term growth.
Investing in Deckers Outdoor Corporation can be a strategic move for business growth, given its robust first-quarter earnings and thePositive analyst sentiment towards its stocks. The company's financials, with growing revenue and earnings, demonstrate its operational strength.
Attractive valuations, with an average 12-month price target around $137-$140, make Deckers' stock an potential value entry point, despite the recent drop in stock price.
The solid performance of Deckers’ brands like HOKA and UGG, coupled with the company's focus on premium footwear and performance categories, position it well for enduring demand and strong consumer finanec.
