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Ugg Parent Company Decker Outdoors No Longer A Good Fit, Says Pivotal Research

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Ugg Parent Company Decker Outdoors No Longer A Good Fit, Says Pivotal Research
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Shares of Deckers Outdoor Corp (NYSE: DECK), the parent company behind multiple brands including UGG boots, have gained 70 percent over the past year — and now might be a good time for investors to move to the sidelines, according to Pivotal Research Group. 

The Analyst

Pivotal Research Group's Mitch Kummetz downgraded Deckers Outdoor rating from Buy to Hold with a price target lowered from $122 to $108.

The Thesis

A bullish stance on Deckers' stock consisted of a belief the company is well-positioned to take advantage of a favorable winter season and a favorable risk-to-reward profile, Kummetz said in the downgrade note. But these two catalysts have since played out, and the stock's gains now imply the risk-to-reward profile "no longer appears favorable," the analyst said. 

Deckers' outlook remains favorable, but a handful of factors yield an outlook that is "not as bullish" as before, Kummetz said:

  • Checks at 60 independent footwear retailers in February found that 2018 boot prebooks aren't coming in as well as previously expected.
  • Retailers continue to be "more cautious" after two warm winters in 2015-16 and 2016-17.
  • Retailers are unlikely to overreact as positively as they would have in the past with future favorable weather trends.
  • The company's fiscal third quarter will prove to be a tough compare, as it is lapping a 6.4-percent two-year stack.
  • Stocks in general tend to lag after a strong winter, and Deckers' performance after a favorable winter "hasn't been great."

Price Action

Shares of Deckers Outdoor were down 7.36 percent at $90.32 Thursday afternoon. 

Related Links:

What Are Deckers Outdoor's Strategies For Long-term Growth?

Q4 Retail Earnings Preview: Will The Results Reflect High Consumer Confidence?

Latest Ratings for DECK

DateFirmActionFromTo
Aug 2018BuckinghamMaintainsNeutralNeutral
Jul 2018WedbushMaintainsNeutralNeutral
Jul 2018PiperJaffrayMaintainsNeutralNeutral

View More Analyst Ratings for DECK
View the Latest Analyst Ratings

Posted-In: Boots Footwear Retailers Mitch Kummetz Pivotal Research GroupAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga

 

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