On Friday, BofA Securities initiated coverage on Skechers USA (NYSE:SKX), assigning the stock a Neutral rating and setting a price target of $67.00. The coverage comes with an expectation that the company, recognized as the third largest global athletic footwear brand, can maintain a low double-digit sales compound annual growth rate (CAGR) and achieve its operating margin goal of 11-13% over the medium term.
The price target of $67.00 is derived from a 17.5 times forward 2024 estimated earnings per share (EPS), which represents a premium compared to the brand's five-year historical average of 15 times. The analyst believes that this valuation is justified due to a rerating in the footwear industry's peer multiples.
According to the analyst's statement, Skechers' current price-to-earnings (P/E) ratio of 16 times is considered to fairly reflect the brand's long-term sales and margin potential, while also accounting for current challenges in the wholesale segment. The outlook suggests that the company's financial and market performance metrics are in balance with the broader industry trends.
Skechers' path to reaching its margin target appears feasible in the medium term, as per the analyst's view. The neutral stance indicates that while there may be positive aspects to the company's financial health and market position, there are also factors that could temper growth or performance, such as the mentioned wholesale challenges.
The initiation of coverage by BofA Securities provides investors with an assessment of Skechers' valuation and potential growth trajectory, based on current industry standards and the company's financial objectives. The $67 price target reflects both the opportunities and risks associated with the stock within the dynamic footwear market.
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