Why Canaccord Genuity Is Positive On Deckers Ahead Of Q1 Results

In a report published Tuesday, Canaccord Genuity analyst Camilo Lyon maintained a Buy rating on shares of Deckers Outdoor Corp DECK with an unchanged $84 price target ahead of the release of its first quarter results on Thursday after market close.

According to Lyon, Deckers's first quarter is the smallest earnings of the year, the stock is set up to "react well" on what should be an "upbeat tone" from management ahead of the key fall and winter season.

Lyon is expecting the company to report revenue growth of 1 percent to $211.5 million and a loss of $1.50 per share as the company's HOKA, Teva and Sanuk lines all "performed well." However, foreign exchange headwinds will likely result in "flattish" overall sales growth and a net gross margin decline of around 50 basis points.

Looking forward, Lyon is expecting Deckers to be conservative with its second quarter guidance while the company can still deliver upside to its full-year 8 percent revenue growth outlook. The analyst added that a cut to the full-year guidance would require either an increase in cancellations (which is unlikely as fall orders are already beginning to ship) or an "unseasonably" warm winter (also unlikely, as early forecasts are predicting another cold winter season).

"We believe sentiment is overly negative, seemingly discounting a reduction in full-year guidance that we do not see happening," Lyon wrote. "Recall also that Deckers is launching the Classic Slim this holiday season in Direct To Consumer and select wholesalers, which is not included in the guidance."

Bottom line, shares of Deckers are trading at a 13x P/E multiple with a 16.4 percent short interest. Since the analyst isn't expecting to hear any "negative surprises" shares should rise higher following the quarterly print.