UPDATE: Morgan Stanley Cuts Skechers USA (SKX) to Equalweight as Styles Shift Toward Adidas-Like Fashion
- Top 10 News for 9/19 - 9/23: Twitter on the Auction Block; Allergan Bolsters NASH Effort; Microsoft Returns Value
- Wall Street falls as energy lags; shares post gains on week
- Rumored Forever, Twitter (TWTR) May Have Finally Put the 'For Sale' Sign Up
- Facebook (FB) Shares Under Pressure on Reports Video Ad Metrics Were Artificially Inflated
- Brookfield Infrastructure (BIP)-Led Consortium to Take Controlling Stake in Petrobras' (PBR) NTS for $5.2B
Get access to the best calls on Wall Street with StreetInsider.com's Ratings Insider Elite. Get your Free Trial here.
(Updated - September 21, 2016 10:16 AM EDT)
Morgan Stanley downgraded Skechers USA (NYSE: SKX) from Overweight to Equalweight with a price target of $25.00 (from $41.00). Analyst Jay Sole noted that consumer's preferred athletic footwear styles are shifting toward pure fashion. As Sketchers adjusts its assortment, he sees slower sales and increasing SG&A. Overall he thinks risk/reward looks balanced.
"The question has been how much of SKX's YTD slowdown has been due to temporary macro factors vs. longer-lasting issues," said Sole. "We think it is more the latter. The shift toward Adidas-like fashion athletic styles and away from Nike-like running SKUs is causing SKX to migrate its product offering faster than expected. This is causing a delay in orders until SKX adjusts."
The analyst added, "At the same time, SKX's global infrastructure investment plans, in order to keep up with rapid international growth, are higher than we previously thought. We see no positive fashion catalysts until 1H17 and expect Street EPS estimates to fall over that time frame. However, with the stock trading at just 12.5x our new FY17 EPS estimate, we think some of this bad news is priced in. Therefore Equal-weight is the correct rating in our view until a new catalyst emerges."
Morgan Stanley's bull case on the stock is $40 and its bear case is $10.
Shares of Skechers USA closed at $23.23 yesterday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Prudential Financial (PRU) Garners Spot on Goldman Sachs's Conviction Buy List
- RBC Capital Downgrades Twitter (TWTR) to Underperform
- UPDATE: Cowen Cuts Boston Beer Company (SAM) to 'Underperform' on Structural Headwinds
Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS View, Analyst PT Change, Downgrades, Hot Comments, Hot Downgrades
Related EntitiesMorgan Stanley
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!