On Friday, Deckers Outdoor Corporation (NYSE:DECK) saw an increase in its price target from Evercore ISI, with the new target set at $1,110, up from the previous $960. The firm maintained an Outperform rating on the stock. This adjustment comes after Deckers' fourth fiscal quarter performance exceeded expectations, particularly for its UGG and HOKA brands, which outperformed the analyst's own forecasts that were already above consensus estimates.
The company's guidance for fiscal year 2025 was deemed conservative, projecting approximately a 10% increase in revenues and a contraction of 210 basis points in gross margins year-over-year. Despite this cautious outlook, Evercore ISI remains optimistic about Deckers' potential to revise its guidance upward throughout the year. The analyst cited several factors for this positive outlook, including UGG's transition to a more year-round product and the momentum behind HOKA's new product releases.
Deckers' international growth outpacing domestic sales and direct-to-consumer (DTC) channels growing faster than wholesale are among the reasons Evercore ISI anticipates margin expansion for the company. The firm's projections for Deckers' earnings before interest, taxes, depreciation, and amortization (EBITDA) are 8% and 11% higher than the Street's estimates for fiscal years 2025 and 2026, respectively.
The analyst's comments highlight the strong momentum behind the HOKA brand and the potential for multiple catalysts that could contribute to Deckers raising its guidance throughout the year. Deckers' track record of setting a lower bar at the beginning of the year was noted, suggesting that the company may outperform the conservative forecasts as the year progresses.
Evercore ISI's raised price target reflects confidence in Deckers' strategy and brand strength, particularly in the HOKA and UGG lines. The firm's expectations for Deckers to surpass its conservative guidance and achieve margin expansion through strategic growth initiatives have contributed to a more bullish view on the company's stock.
InvestingPro Insights
Deckers Outdoor Corporation (NYSE:DECK) has demonstrated robust financial health and growth potential, which is further substantiated by real-time data from InvestingPro. With a market capitalization of $23.22 billion and a P/E ratio standing at 32.49, Deckers showcases a solid valuation in the market. The company's revenue growth is notable, with a 15.34% increase over the last twelve months as of Q3 2024, indicating a strong upward trajectory in sales.
InvestingPro Tips highlight that Deckers holds more cash than debt on its balance sheet, providing financial stability and flexibility. Additionally, the company is trading at a low P/E ratio relative to near-term earnings growth, suggesting that it may be undervalued considering its earnings potential. Analysts have revised their earnings upwards for the upcoming period, reflecting optimism in Deckers' financial performance. Notably, the company has been profitable over the last twelve months, which is a reassuring sign for investors.
For those interested in deeper analysis, there are over 15 additional InvestingPro Tips available, which can be accessed by visiting https://www.investing.com/pro/DECK. To enhance your investment research, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. These insights can provide valuable context for Deckers' strategic growth initiatives and the potential for the company to surpass its conservative guidance, as highlighted by Evercore ISI.
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