It’s the third largest shoe brand in the world, and UBS analysts think Skechers’ growth potential is “underappreciated.”
UBS rates Skechers stock a buy with a $57 price target.
To gain investor confidence, UBS analysts say Skechers has to achieve organic sales growth in the high-single digit percent range, increase EBIT margin and at least meet earnings per share Street expectations.
Last week, Skechers reported first-quarter earnings and sales that beat expectations.
“Skechers’ mission of delivering comfort, style and quality and innovation at a value resonated with consumers prior to the onset of the COVID-19 pandemic, and the same is true now,” said David Weinberg, chief executive of Skechers, on the earnings call, according to a FactSet transcript.
“Consumers are returning to a new normalcy, one that involves more walking, more comfort on the job, and a casual lifestyle mindset.”
An NPD Group report published in January found that there is a “comfort movement” taking place that’s driven by four factors: “work-from-home (WFH) routines, an emphasis on stress relief, health and wellness efforts, and an overall casualization shift which has been taking shape for a number of years.”
Lots of stretch and flexible waistbands are two of the features of the trend, but that doesn’t mean it’s just about pajamas and workout gear.
Maria Rugolo, apparel industry analyst at NPD, is watching how behavior changes as we emerge from the pandemic.
“That is why I expect a blurring of the lines for product offerings and attributes, as all eyes will be watching these comfort-driven categories to see what traits can be infused into other areas of the apparel industry,” she wrote.
Crocs Inc. CROX, +16.78%, which reported record first-quarter revenue on Tuesday, is also known for comfort. But with its high-profile collaborations, such as the one with Justin Bieber, and red carpet appearances, such as this past Sunday when Questlove wore a pair to the Oscars, Crocs have also become a fashionable item.
“We are highly encouraged by Croc’s strong start to the year fueled by ongoing momentum which is among the healthiest of any brand we cover,” wrote Baird analysts in a Tuesday note.
“We continue to expect Crocs to remain a relative winner given strong demonstrated brand momentum and a pivot to offense on product/marketing, and given the strong recent upward revisions to EPS estimates, the stock still looks attractive at current levels even following a strong run in 2020 and to-date in 2021.”
Baird rates Crocs stock outperform with a $135 price target, up from $100.
Crocs stock is up nearly 58% for the year to date, and has skyrocketed 320.4% over the last year.
Skechers shares are up 38.2% for 2021 so far, and have gained 87.4% over the past 12 months.
The S&P 500 index SPX, -0.03% is up 11.4% for the year to date.