09-22-2016, 01:09 AM
Selloff on downgrade:
Morgan Stanley’s Jay Sole pointed out that the shift in consumer preference to pure fashion footwear is pushing Skechers USA Inc SKX 8.29% to adjust its assortment, leading to slower-than-anticipated sales growth and SG&A deleverage. Sole downgraded the rating on the company from Overweight to Equal Weight, while lowering the price target from $41 to $25... Skechers needs to spend more than earlier expected to add distribution capacity in Europe, South America, China and the United States. An additional $75–$100 million is required for corporate office space improvement. “We see no positive fashion catalysts until 1H17 and expect Street EPS estimates to fall over that time frame. However, with the stock trading at just 12.5x our new FY17 EPS estimate, we think some of this bad news is priced in,” Sole explained. The FY17 EPS estimate has been lowered from $2.25 to $1.85 to reflect order delay and increased SG&A.
Morgan Stanley On Skechers: 'Three Stripes, You're Out' | Benzinga
Bad news priced in, that seems an understatement to us.. And not all analysts are as negative as Morgan Stanley:
While there have been concerns surrounding the athletic apparel and footwear trend, Skechers USA Inc SKX 8.39% has more than a 20 percent growth opportunity over the next two years, Citi’s Scott T Chronert said in a report. He maintained a Buy rating on the company, while adding the stock to the SMID Value Creators Focus List. Although the athletic apparel and footwear trend seems to be “in the later innings,” Skechers’ global growth prospects remain intact, analyst Chronert commented. The company is likely to deliver a positive earnings inflection in H2, following a y/y decline in comps in Q2... Although there is risk related to Skechers’ Q3 results being impacted by “some lingering promotional activity,” this is already reflected in the company’s current valuation and trading patterns, the analyst noted. Overall Strength “We have increased confidence in Skechers’ international momentum, its strong balance sheet and clean inventories,” Chronert wrote. Since the company faces easier comps in H2, the recent pressure on shares “could prove to be an attractive entry point.”
Skechers U.S.A., Inc. (NYSE:SKX) - Skechers A Top Opportunity, Says Citi | Benzinga