Investing.com -- Citi analysts on Friday upgraded shares of Deckers Outdoor Corp (NYSE:DECK) to Buy from Neutral, while maintaining the price target of $215.
Deckers stock rose more than 1% in premarket trading.
Citi analysts at Citi believe the 24% decline in Decker's stock price following its third-quarter earnings release is “unwarranted.”
The downturn was primarily driven by concerns over slowing growth for the Hoka brand, which Citi analysts consider to be “misunderstood/overblown.”
According to Citi, the expected slower sales in Hoka’s wholesale business in the fourth quarter of 2025 and the first half of 2026 are due to a strategic reduction in the number of wholesale doors compared to the previous year, as well as a more extended launch timeline for the Bondi 9 product this year.
“We believe underlying demand remains strong,” analysts led by Paul Lejuez said in a note, highlighting a 28% increase in direct-to-consumer (DTC) sales in the third quarter.
The analysts also expressed confidence in the UGG brand's continued momentum, noting double-digit growth over the past two years.
They anticipate that UGG will maintain at least mid-single-digit growth in fiscal 2026, despite the company’s Q4 guidance implying a decline in UGG sales.
Citi views this guidance as “very conservative,” adding it is “a result of the strong sell-throughs during the holiday,” which left limited inventory for in-demand products.
In terms of valuation, Decker trades at a fiscal 2026 estimated price-to-earnings (P/E) multiple of 24 times, which is below that of its high-growth peers.
Citi's estimates for fiscal 2025 and 2026 earnings per share stand at $6.13 and $7.10, respectively, with the latter being notably higher than the consensus estimate of $6.65. The $215 price target implies a forward P/E of 30 times and an EV/EBITDA multiple of 22.5 times.
“Of the companies that have visible double digit topline growth this year, DECK trades at the lowest multiple,” analysts said.
They point out that Deckers multiple is lower than that of some mega-cap retailers, despite Decker's higher expected growth rate.
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