Analysts Diverge On Deckers Outdoor Forecast

Deckers Outdoor Corp's DECK 13 percent sales growth year-to-date for its core UGG footwear brand suggest a "meaningful consumer appetite" for the product, an analyst said Monday.

Jefferies' Randal J. Konik reiterated a Buy rating and $110 target on Deckers, and said falling costs for raw materials in the form of sheepskin, plus increasing diversification of its product offerings, suggest a bullish outlook for the company.

Deckers, down about 0.5 percent at $72.55, is down nearly 23 percent in the past month, largely on its third-quarter earnings miss and lower outlook issued on January 29.

Earlier Monday, Morgan Stanley's Jay Sole downgraded Deckers to Equal-Weight, pointing to recent results as evidence that UGG is fading as a favored brand.

But much of the same data drives Konik to an opposite conclusion.

Citing Google search data and a "solid replacement cycle," Konik said UGG's "brand equity remains strong."

Moreover, Konik said Deckers' plan to diversify its product offerings is showing signs of success that will "de-risk" the seasonal nature of sheepskin boot sales.

Declining raw materials costs will result in an operating margin expansion of 50 basis points in fiscal 2016, according to Konik, who sees an upside to Deckers' current share price of up to 65 percent.

Of 22 analysts following Deckers, 13 maintain Buy ratings or the equivalent, versus nine at Hold.