Skechers has upside potential that Wall Street may very well be lacking, Cowen mentioned. Analyst John Kernan upgraded the inventory to outperform from market carry out. He additionally raised the worth goal to $65 from $48. The new goal implies upside of 39.4%. Kernan mentioned Skechers stays the second most-liked informal sneaker model within the U.S. with about 19% choice share, behind chief Nike at round 25%. He mentioned internet site visitors grew 38% yr over yr. “Skechers’ value proposition continues to resonate based on our checks and is gaining preference in our survey for casual/lifestyle footwear from Nike and Adidas ,” he mentioned in a be aware to shoppers Monday. “We view Consensus sales and EPS estimates as too conservative with working capital drags ending in 2022 supporting an inflection in Free Cash Flow.” He mentioned analysts could also be underestimating earnings for the footwear firm. Specifically, he is anticipating 12% gross sales progress in 2023, above the Wall Street consensus of 9%. Kernan famous the Street could not have totally accounted for potential tailwinds coming from a provide chain restoration. Still, he mentioned home wholesale will decelerate in 2023 to a 6% improve from a 26% leap a yr prior. But he mentioned direct-to-consumer estimates must be too conservative. Meanwhile, Kernan mentioned stock {dollars} ought to gradual within the fourth quarter and normalize in 2023, which would cut back strain on working capital. He additionally mentioned Skechers has a path to $500 million free money circulation by 2025 and a $1.5 billion inventory repurchase by means of 2025, all whereas preserving internet money close to its historic stage. Taken collectively, he mentioned, gross sales momentum and margin restoration will drive per-share earnings progress of 40% or extra in 2023 and 20% or extra in 2024. He additionally famous the worldwide diversification of the business, mentioning positives in worldwide markets corresponding to optionality in China and continued share positive factors in Europe. The inventory gained 1.9% in premarket buying and selling and is up 11.1% this yr. It outperformed the broader market in 2022, shedding 3.3%. — CNBC’s Michael Bloom contributed to this report.
Cowen upgrades Skechers, says footwear stock could rally nearly 40% as brand gains momentum