Shares in Deckers Outdoor Corp (NASDAQ:DECK) have been rising steadily today on the back of two reports that have called the stock undervalued. The first, from Jeffries Research puts a price target of $50 on the company, while the second from Sterne Agee went further, placing a twelve month target of $65 on the stock.
Shares in the firm closed yesterday at $38.29, but have been trending upward today, opening at $42.36 after positive trading before the market opened. The equity stands at $42.13 at time of writing. That denotes a one day increase of 10%.
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Deckers Outdoor Corp (NASDAQ:DECK) is a footwear accessory and apparel designer. The company’s most famous product is the UGG range of footwear. Increased sales of products in that range have spurred the positive reports from the analysts.
The Stern Agee report, which upgraded the stock from Neutral to Buy, asserts that the firm’s upcoming Fall 2013 collection is likely to result in increased sales and enhanced margins. The report sees the company’s 2012 results coming in worse than expected, but that downside is eliminated by a much higher than expected 2013 performance.
Earnings per share in 2013 are to come in at $4.13, higher than the previous estimate of $3.31. A loss is still expected in the first half of 2013 because the company’s flagship products are reliant on winter weather. The company will more than make up for that loss in the second half of 2013, according to the analysis.
Shares in Deckers Outdoor Corp (NASDAQ:DECK) have fallen from a high of almost $120 per share reached late last October. The firm’s shares opened in 2012 trading at around $75, and have been trending downward all year, reaching a low of $28.53 in November. Exaggerated reports of the death of the UGG brand appear to be responsible for the decline in the firm’s value.
Jeffries Research report highlights positive trends in demand for the company’s products. Internet searches for UGG boots have increased in recent months, and the product was among the top ten searched for on Cyber Monday. Demand for the product, measured by Internet activity, still exists.
If the coming Winter stays cold, rather demonstrating last year’s record high temperatures, demand for products in the UGG line is expected to stay strong. Jeffries calls the company the best Risk/Reward in retail today, with multiples well below the average for the sector.
According to the report, sales should stabilize for Deckers Outdoor Corp (NASDAQ:DECK) and margins should inflect upward. This will increase earnings growth, which will in turn drive the firm’s stock to higher multiples. Jeffries recommends aggressive purchasing of the stock at yesterday’s price levels.
Today is of course a different story. The market has taken the predictions of analysts on board, and they have resulted in a one day bump of 10%. Based on analyst speculation the market appears reluctant to send Deckers Outdoor Corp (NASDAQ:DECK) shares beyond $42 by any great magnitude.
The company will need to back up that speculation with real numbers. Analysts watching the company’s sales over the holiday period will provide them before the company itself does. The announcement of those numbers should drive the next big change in the firm’s stock.