Deckers Outdoor has been on a tear recently, and Bank of America thinks there’s more upside to come. Analyst Christopher Nardone reinstated coverage of Deckers Outdoor with a buy rating, saying the footwear company has a strong portfolio of brands led by Hoka and Ugg that will help the stock outperform. “We view DECK as a high quality stock with a compelling growth trajectory led by HOKA, where we see a strong line of sight for continued market share gains (recently eclipsed $1.1bn of TTM sales),” Nardone wrote in a Tuesday note, calling the stock a “rare, consistent compounder.” “UGG, the company’s largest business today, should not be ignored as it is a high margin, strong cash flow business that should continue to help fund HOKA’s growth and has carved its own path for market share gains,” Nardone continued. The analyst’s $425 price objective implies roughly 21.5% upside from Monday’s closing price at $349.93. Deckers has been on fire over the past six months, surging 31.7%, while the S & P 500 is down 6.3% in that time. To be sure, a rising inflationary environment could hurt Deckers in the near term should it lead to more promotions to clear excess inventory, but footwear has so far been more protected from rising promotions, according to the analyst. Hoka is the “crown jewel” in Deckers’ portfolio with a “clear runway for growth” as more consumers learn about the brand, according to the note. The analyst estimates that brand revenue will double to $2.2 billion by fiscal year 2025 and sees it accounting for roughly 85% of Deckers’ total enterprise value. “We see additional growth opportunities outside the specialty run category and expect HOKA will continue to gain traction with non-core runners,” read the note. Separately, the analyst expects that Ugg is “not just a pandemic winner” that will continue to gain market share from here. —CNBC’s Michael Bloom contributed to this report.
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