Jefferies moved Deckers Outdoor (NYSE: DECK) to a Buy rating from Hold in a note issued on Monday, saying the market has likely over-penalized the company for a deceleration in growth that the firm believes is already priced in and may be starting to reverse.
Analyst Blake Anderson framed the company's medium-term outlook as realistic and said there is upside potential over a 12-plus month horizon that depends on the success of HOKA product innovation - where Anderson described early signs as encouraging.
Deckers set out medium-term targets during its fourth-quarter earnings call that call for high-single-digit revenue growth, operating margins remaining in the low 20% range, and low-double-digit EPS growth inclusive of share repurchases. Jefferies noted those targets as achievable in its assessment.
Anderson highlighted that implied EBIT growth is expected to slow to about high-single-digits, down from roughly a 20% compound annual growth rate over the past six years. He added that this deceleration appears to be reflected in the stock price, pointing to a compression in the price-to-earnings multiple from about 33 times to approximately 13 times.
On the HOKA brand, Jefferies indicated a substantial portion of the current slowdown stems from marketplace execution missteps and, in its view, a lack of product newness - both issues the firm expects to see improvement on going forward. The research team was particularly positive about segmentation initiatives, calling the recent Clifton Pro launch a significant milestone.
Jefferies drew a parallel to UGG's development, noting how that brand evolved from a limited set of winning SKUs to a broader, diversified assortment. The firm views that trajectory as a possible model for HOKA as segmentation and product cadence are refined.
Regarding UGG specifically, Anderson argued that the brand's durability is underappreciated. He described a mid-single-digit growth outlook for UGG supported by assortment breadth, ongoing innovation, and its status as a category leader without a pure-play competitor. Jefferies also flagged Deckers' cash position - representing about 13% of market capitalization - as providing downside support for the equity.
Bottom line: Jefferies upgraded Deckers to Buy, citing achievable medium-term guidance, the prospect of HOKA product-driven recovery, steady contribution from UGG, and a cash cushion that helps limit downside risk.