Birkenstock Holding Ltd.\u2019s stock rose Monday as analysts initiated coverage of the iconic German sandal maker with mostly bullish ratings now that the lockup period after its initial public offering has expired. <\/p>\n
Of 13 analysts submitting ratings to FactSet, nine have a buy rating or equivalent on the stock, while four have a hold rating. The average stock-price target is $43.78, or 6% above its current price. <\/p>\n
\n
But the stock
\n BIRK,
\n +0.66%<\/bg-quote>
\n was last quoted at $41.13, below its IPO issue price of $46, which it has not yet attained. The company went public in October and marked one of the worst debuts for a billion-dollar deal of the last decade, according to Renaissance Capital. <\/p>\nFor more, read:<\/strong>\u00a0Birkenstock\u2019s stock falls nearly 13% in trading debut, ends well below IPO price<\/p>\nAnalysts weighing in on Monday highlighted the company\u2019s transformation from a family-owned company to a global footwear brand with a portfolio that\u2019s underpinned by its core silhouettes and loyal customers. <\/p>\n
\u201cGiven its historic brand and loyal customer base, we believe the company is well-positioned to drive strong top-line growth, maintain its attractive margin profile, and expand its addressable market,\u201d said Jefferies analysts led by Randal Konik, who assigned the stock a buy rating and $50 price target.<\/p>\n
Konik believes the company\u2019s vertically integrated multichannel distribution model can help build brand awareness and increase its addressable market.<\/p>\n
In its IPO filing documents, the company describes the buildout of its direct-to-consumer channel and how it balances that with a wholesale channel of about 6,000 carefully selected partners in more than 75 countries. Those range from orthopedic specialists to major department stores to high-end fashion boutiques. Birkenstock limits access to certain premium products to a curated group of partners in an effort to create scarcity, according to the prospectus.<\/p>\n
For more, read:<\/strong> Birkenstock is going public: 5 things to know about the iconic German sandal maker\u2019s IPO designs<\/p>\nJefferies also welcomed an expected long-term mid- to high-teens revenue-growth rate, gross margins that are expected to come to exceed 60%, and adjusted earnings before interest, taxes, depreciation and amortization margins above 30%. <\/p>\n
JPMorgan agreed and noted that the adjusted Ebitda profile is about 10 points above global footwear peers and is supported by the company\u2019s more than seven years of double-digit unit growth.<\/p>\n
Management\u2019s scarcity-creation approach is a positive, the analysts said as they initiated coverage with an overweight rating. Current demand is understood to be at least 20% higher than management\u2019s revenue plan, supporting brand health and long-term sustainable growth, they wrote in a note to clients. JPMorgan set a price target of $48.<\/p>\n
Stifel also assigned the stock a buy rating with a $47 price target. <\/p>\n
\u201cConsumer trends embrace the qualities of Birkenstock\u2019s products: comfort and minimalist fashion, quality craftsmanship, natural materials,
versatility, and attention to foot health,\u201d wrote the analysts led by Jim Duffy. <\/p>\n
Stifel is expecting the roughly \u20ac200 billion ($214.6 billion) nonathletic-footwear market to grow at a more than 4% annual compound annual growth rate through 2027, offering the company the opportunity to almost double its market share from 1% retail value in 2022 to 1.7% in 2027.<\/p>\n
William Blair initiated coverage of the stock with an outperform rating and highlighted another advantage the company has over rivals.<\/p>\n
\u201cThe company\u2019s owned production and engineered distribution model create almost real-time flexibility, enabling the company to send product to where it makes the most money while driving high-quality growth,\u201d analysts Sharon Zackfia and Tania Anderson wrote.<\/p>\n
They also welcomed the opportunity in the company\u2019s push into the Asia-Pacific, Middle East and Africa regions, markets neglected in the past as Birkenstock focused on the U.S. and Europe. <\/p>\n
Further supporting growth, the company\u2019s pipeline addresses new categories and use occasions, including products designed for healthcare, hospitality and utility professionals, expanded collections of active and outdoor, additional children\u2019 profiles and exchangeable footbeds.<\/p>\n
At BofA Securities, analysts Lorraine Hutchinson and Christopher Nardone struck a more subdued tone, starting coverage with a neutral rating and a $44 price target. <\/p>\n
\u201cWhile we view it as a strong brand with unique attributes, we think outsized growth on top of the robust recent trends will be difficult,\u201d they wrote in a note. \u201cThis leaves multiple expansion as the key driver
of stock performance.\u201d <\/p>\n
The stock is already trading at a discount to high-growth athletic brands but at a premium over other footwear stocks, they said, adding, \u201cWe see this as appropriate.\u201d <\/p>\n
Deutsche Bank and UBS also rate the stock a hold.<\/p>\n
One notable bear had warned investors before the deal that the valuation was too high and that it might be somewhat of a red flag.<\/p>\n
David Trainer, chief executive of independent equity-research company New Constructs, pointed out in early October that the company would have a bigger market cap than peers such as Skechers
\n SKX,
\n +3.06%<\/bg-quote>,<\/span>
\n Crocs
\n CROX,
\n -2.06%<\/bg-quote>
\n and Steve Madden
\n SHOO,
\n -1.01%<\/bg-quote>.<\/span>\n <\/p>\nThat would leave Nike
\n NKE,
\n +0.18%<\/bg-quote>
\n and Uggs maker Deckers Outdoor
\n DECK,
\n +2.64%<\/bg-quote>
\n as the only footwear companies with a bigger market cap. To justify that, Birkenstock would need to generate more than $3.8 billion in annual revenue, or more than three times the $1.24 billion chalked up for all of 2022.<\/p>\nFor more, see: <\/strong>Birkenstock\u2019s valuation is too high and investors may not make money in its IPO, analyst says<\/p>\n\u201cWe don\u2019t see this happening anytime soon, if ever,\u201d the analyst said.<\/p>\n
Birkenstock said last week it would use the proceeds of the IPO for early loan repayment, which has reduced its leverage to 2.5 times.\u00a0<\/p>\n
The company has repaid $450 million of its dollar-denominated Term B loan and \u20ac100 million of its euro-denominated vendor loan. Both those loans were used to finance the acquisition of a majority stake in the company by L Catterton
\n LCAA,
\n +0.05%<\/bg-quote>,<\/span>
\n an investment company formed through the partnership of Catterton, LVMH
\n MC,
\n -0.80%<\/bg-quote>
\n and Groupe Arnault.\u00a0<\/p>\nThe stock was up 0.2% Monday and has traded in a range of $35.83 to $42.51 since its IPO.<\/p>\n<\/p><\/div>\n
Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Birkenstock Holding Ltd.\u2019s stock rose Monday as analysts initiated coverage of the iconic German sandal maker with mostly bullish ratings now that the lockup period after its initial public offering has expired. Of 13 analysts submitting ratings to FactSet, nine have a buy rating or equivalent on the stock, while four have a hold rating. […]<\/p>\n","protected":false},"author":1,"featured_media":43280,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[32],"tags":[],"class_list":{"0":"post-43279","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-investing"},"yoast_head":"\n
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