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Cowen Says The Big Sell-Off In Skechers Is A Buying Opportunity

Cowen Says The Big Sell-Off In Skechers Is A Buying Opportunity
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Skechers Shares Jump After Q3 Earnings Beat, Analysts Lift Price Targets

Skechers USA Inc (NYSE: SKX) reported an in-line EPS in its first quarter report while revenue topped estimates. The stock plummeted, however, as the company's second quarter guidance came in notably weak.

"Patient" investors should take advantage of the decline and be buyers of the stock, according to Cowen.

The Analyst

Cowen's John Kernan maintains an Outperform rating on Skechers' stock with a price target lowered from $46 to $41.

The Thesis

Skechers management offered an outlook that implies a "sharp" deceleration in the pace of sales due to a shift in the timing of shipments to key wholesale accounts, Kernan said in a note. Weather and distributor weakness seen in the middle east represents another "spoiler," but the silver bullet is the company's woes aren't product related. The company's guidance implies an uptick in gross margins, but below the 233 basis point increase seen in the first quarter.

The weather issues cited by Skechers will likely impact the entire shoe sector as a whole, Kernan wrote. Nevertheless, the company's "newness and innovation" will continue to be well received by wholesale partners and its owned retail operation, which supports the longer-term case for the company to achieve expectations calling for topline growth of 13 percent and the analyst's longer-term view of $3 in earnings potential.

Price Action

Shares of Skechers were trading lower by nearly 30 percent at $30.75 early Monday afternoon.

Related Links:

Skechers Skids 25% As Q2 Guidance Rattles Investors

Retail Analyst: Foot Locker, Skechers And Steve Madden Poised To Run Higher

Photo by Brett Hershman.

Latest Ratings for SKX

Oct 2018CitigroupMaintainsNeutralNeutral
Oct 2018BuckinghamMaintainsBuyBuy
Oct 2018BuckinghamMaintainsBuyBuy

View More Analyst Ratings for SKX
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