Analyst Starts Skechers At Neutral, Points At Increased Inventory And Investments

Susquehanna started Skechers USA Inc SKX with a Neutral rating and price objective of $27.

While analysts Sam Poser and Renato Basanta believe the reaction to its Q2 earnings miss was overdone, they remain on the sidelines citing higher investments and inventory. The stock lost about 23 percent after its second quarter results on July 21.

The analysts see the stock reaching $35 in a bull case scenario if inventory levels drop in tune with the sales trend apart from better than expected domestic wholesale. On the other hand, if the company's sales fail to meet the estimated levels, there is a downside risk of the stock hitting $20.

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The brokerage pointed out that the recent quarter results comparison on a year-over-year basis became tough because last year's second quarter was strong citing shipments moved from the first and third quarters due to port slowdown.

The analysts summed up by saying, "All that said, it appears to us that the 3Q16 guidance provided on the 2Q16 earnings' call may prove to be conservative as retailers are buying much closer to need than they did at this time last year, but it's a bit too early to tell."

On Friday, the stock edged up by $0.16, or 0.65 percent, to $24.94.