UBS calls Hoka sneaker maker a 'significantly underappreciated growth stock'

UBS has reiterated a 'buy' rating on Deckers Outdoors (DECK), setting a $158 price target that implies a 32% upside, despite the stock's 41% year-to-date decline. Analyst Jay Sole views the current pullback as an attractive entry point, citing the company's undervaluation and increased probability of future earnings growth, with an upside case of $10.00 EPS by FY28. This optimistic outlook is driven by the Hoka brand's strong sales potential, expansion into new verticals and major geographic markets, and increased marketing investments.

Analysis

UBS has reiterated a bullish stance on Deckers Outdoors (DECK), framing the stock's significant 41% year-to-date decline as an attractive entry point for a growth company it deems undervalued. The bank's analyst, Jay Sole, has issued a $158 price target, implying approximately 32% upside from the recent $119.63 closing price. This optimism is underpinned by an upward revision in earnings expectations, with the analyst noting a greater probability of Deckers achieving an upside case of $10.00 EPS by FY28, a substantial increase from the current model of $7.90. The primary catalyst for this outlook is the strong growth potential of the Hoka brand, which is expected to expand into new verticals like lifestyle and apparel, as well as major geographic markets in Asia and Europe. Supporting this growth, the company has increased its marketing investment to over 10% of sales. While tariff-related risks are acknowledged, they are not seen as a material impediment to the long-term growth narrative, which is also buoyed by the perceived durability of the "max cushioning" footwear trend.

Key Decisions for Investors

• Investors may consider the 41% year-to-date pullback in DECK shares as a potential opportunity to initiate or add to positions, given the analyst's view of significant undervaluation.
• The validation of the bull thesis hinges on the Hoka brand's performance; therefore, investors should closely monitor its sales growth, international market penetration, and success in new product categories in upcoming quarters.
• Track progress toward the analyst's upside EPS target of $10.00, paying attention to how the increased marketing spend impacts both top-line growth and near-term profit margins.
• While the analyst downplays tariff risks, it is prudent to monitor any trade policy developments that could affect input costs and margins for the footwear manufacturer.