Jefferies bullish on Deckers Outdoor, sees HOKA growth slowdown as oversold

Investing.com -- Jefferies upgraded Deckers Outdoor (NYSE: DECK) to Buy from Hold in a note on Monday, arguing that the market has overly penalized the stock for a growth slowdown that the firm believes is already reflected in the share price and is showing early signs of reversing.

Analyst Blake Anderson sees the company's medium-term guidance as "achievable and view upside opportunity over 12-plus months depending on success of HOKA product innovation, where early signs are encouraging."

Deckers' medium-term guide, provided on its fourth-quarter earnings call, calls for high-single-digit revenue growth, stable operating margins in the low 20% range, and low-double-digit EPS growth, including buybacks.

Anderson noted that implied EBIT growth is set to slow to approximately high-single-digits from a roughly 20% compound annual growth rate over the past six years, but said "we believe this is reflected in shares," with the price-to-earnings multiple having compressed from 33 times to approximately 13 times.

On HOKA, Jefferies said, "a meaningful part of HOKA's slowdown has been driven by missteps of marketplace management and in our view lack of newness, which should be improved going forward."

The firm was "especially optimistic" about enhanced segmentation efforts, citing the recent Clifton Pro launch as "a significant milestone" and pointing to UGG's evolution from a few winning SKUs to a diversified assortment as a blueprint.

UGG durability is also "underappreciated," Anderson said, with the mid-single-digit growth outlook supported by product diversity, innovation and its position as a category leader with no pure-play competitor. Cash representing 13% of market capitalization provides downside support.

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