UBS reiterates Buy rating on Deckers Outdoor stock, sees growth potential

UBS maintained its Buy rating and $158 price target on Deckers Outdoor (DECK), citing significant undervaluation and robust growth prospects, particularly from its HOKA and UGG brands. The firm anticipates continued EPS surprises, supported by strong financials including 15.49% revenue growth and a 57.63% gross margin, and now sees a higher probability of its FY28 EPS upside case ($10.00) materializing, addressing long-term earnings potential concerns. This positive outlook is reinforced by Deckers' strong Q1 results, with EPS exceeding estimates by 21% and sales by 7%, leading to widespread analyst estimate revisions and price target increases.

Analysis

Deckers Outdoor (DECK) is experiencing a period of strong operational performance and overwhelmingly positive analyst sentiment, led by a reiterated Buy rating from UBS. The company's recent fiscal first quarter significantly surpassed expectations, with earnings per share beating estimates by 21% and sales outperforming by 7%. This strength is primarily driven by its HOKA and UGG brands, which fueled a 15.49% year-over-year revenue increase and a robust gross profit margin of 57.63%. The market is responding favorably, with 19 analysts revising earnings estimates upward and multiple firms, including Truist, TD Cowen, Raymond James, and Evercore ISI, raising their price targets. UBS has grown more confident in the company's long-term earnings power, seeing a higher probability of its upside Fiscal Year 2028 EPS case of $10.00 materializing, which directly addresses a key investor question. This could support a re-rating of the stock's price-to-earnings ratio from its current 18x to over 20x. While overall performance is strong, a minor point of concern is the noted year-over-year decline in HOKA's U.S. direct-to-consumer business, though this was offset by broader strength across the brand.

Key Decisions for Investors

• Given the strong Q1 earnings beat, widespread upward analyst revisions, and increasing confidence in long-term EPS growth, investors could view the current 18x P/E ratio as an attractive entry point ahead of a potential valuation re-rating.
• Monitor the HOKA brand's channel performance closely, specifically the U.S. direct-to-consumer segment, as sustained weakness there could challenge the primary growth narrative despite current wholesale strength.
• Future earnings reports will be critical catalysts; continued execution toward the low double-digit compound annual growth rate projected by UBS is necessary to validate the bullish thesis and justify a higher stock price.