Deckers Stock Rises on Jefferies Upgrade, Bucking Broader Market Decline

Deckers Outdoor (NYSE:DECK) shares climbed on Monday, outperforming a broadly negative market after analysts at Jefferies upgraded the stock, arguing that concerns over a slowdown at the popular HOKA running shoe brand have been overstated.

Jefferies Upgrades to 'Buy'

Jefferies raised its rating on Deckers to Buy from Hold and increased its 12-month price target to $130 from a previous $110. According to the firm's note, the market has "overly penalized" the stock for a deceleration in HOKA's growth, a factor Jefferies believes is now fully reflected in the share price.

Analyst Blake Anderson pointed to the company's solid medium-term financial guidance as a basis for renewed confidence. Key factors in the upgrade include:

• Expectations for high-single-digit revenue growth.
• Stable operating margins projected in the low-20% range.
• An improving product innovation pipeline for HOKA, addressing recent "marketplace management missteps."
• The underappreciated durability and product diversity of the UGG brand.

Outperforming a Weak Market

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In mid-day trading, Deckers stock rose 1.6% to $107.66, touching an intraday high of $110.78. The gain was notable as it came against a challenging market backdrop, with the S&P 500 falling 0.8% and the Nasdaq Composite dropping 1.5% amid caution ahead of inflation data and the start of corporate earnings season.

The bullish sentiment was reinforced by investment firm Stifel, which separately reiterated its Buy rating on Deckers with a $144 price target. Stifel cited expectations for upside to estimates and significant long-term growth potential for the HOKA brand.

What It Means for Investors

The analyst upgrades refocus attention on the fundamental strengths of Deckers' core brands. Jefferies sees the recent issues at HOKA, including a lack of new products, as temporary and correctable. The recent launch of the Clifton Pro shoe was highlighted as a positive step in the brand's strategy.

Furthermore, the note suggests that investors may be underestimating the consistent performance of the UGG brand, which provides a stable foundation for the company's earnings. The upgrades suggest a view that despite a recent slowdown, the long-term earnings trajectory for Deckers remains robust.