Deckers stock momentum builds with Hoka, but Citi cautious on valuation By Investing.com

On Friday, Citi updated its outlook on Deckers Outdoor Corporation (NYSE: NYSE:), increasing the price target to $178 from $170 while maintaining a Neutral rating on the stock.

The adjustment followed the company’s second-quarter earnings per share (EPS) of $1.59, surpassing consensus estimates of $1.23. The performance was attributed to robust growth in its Hoka and UGG brands, with Hoka sales climbing 35% against a forecasted 23% and UGG sales up 13%, compared to the expected 3%.

Deckers’ gross margin (GM) also outperformed expectations, with a significant increase of 250 basis points in the second quarter. However, despite these positive results, management’s updated fiscal 2025 (F25) guidance only saw a modest raise of approximately $0.18 at the midpoint. This conservative outlook suggests UGG sales will be flat in the second half of the year, and anticipates a decline in GM of approximately 300 basis points.

Market expectations are leaning towards a more optimistic EPS forecast for F25, with projections moving beyond $6.00, in contrast to the company’s guidance of $5.15 to $5.25. The second quarter demonstrated UGG’s capability to surpass challenging comparisons from the previous year and highlighted the continued strong momentum of the Hoka brand.

Despite the positive trends, Citi’s stance is tempered by valuation concerns. Deckers Outdoor shares were trading at an estimated price-to-earnings (P/E) multiple of approximately 29.0 times for F25 in pre-market activity. The potential for significant multiple expansion is seen as limited, given the expected increase in competition for the Hoka brand over the coming 12 months.

In other recent news, Deckers Outdoor Corporation reported robust growth in its second fiscal quarter of 2025. The company’s earnings per share (EPS) of $1.59 surpassed both Evercore ISI’s and the Street’s expectations. This was attributed to strong sales growth in the company’s HOKA and UGG brands, and significant gross margin outperformance.

The company’s gross margin expanded to 55.9%, primarily due to a shift in brand mix towards the higher-margin HOKA brand. Deckers also reported a revenue of $1.3 billion, with diluted earnings per share rising by 39% to $1.59.

Evercore ISI, Barclays, and Jefferies have all raised their price targets for Deckers, reflecting confidence in the company’s continued financial success. Evercore ISI increased its price target from $185.00 to $195.00, Barclays to $190 from $180, and Jefferies to $167 from $150.

Deckers’ strong performance has led to an upward revision in its sales and earnings per share (EPS) guidance. In addition, the company executed a six-for-one forward stock split and raised its fiscal 2025 revenue guidance to approximately $4.8 billion. These recent developments underscore Deckers’ ongoing growth and strategic market positioning.

InvestingPro Insights

Recent data from InvestingPro adds depth to Citi’s analysis of Deckers Outdoor Corporation. The company’s market capitalization stands at $23.18 billion, with a P/E ratio of 28.99, aligning closely with Citi’s pre-market estimate. Deckers’ impressive financial performance is further evidenced by its robust revenue growth of 20.3% over the last twelve months, reaching $4.44 billion.

InvestingPro Tips highlight Deckers’ strong financial position and market performance. The company holds more cash than debt on its balance sheet, indicating financial stability. Additionally, Deckers has shown a high return over the last year, with a remarkable 85.26% price total return. This aligns with the positive momentum noted in the article, particularly for the Hoka and UGG brands.

It’s worth noting that 9 analysts have revised their earnings upwards for the upcoming period, suggesting continued optimism about Deckers’ performance. This sentiment is reflected in the company’s strong EBITDA growth of 47.89% over the last twelve months.

For investors seeking more comprehensive insights, InvestingPro offers 13 additional tips for Deckers Outdoor Corporation, providing a deeper understanding of the company’s financial health and market position.

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