Wednesday, Wells Fargo (NYSE:WFC) initiated coverage on Skechers USA (NYSE:SKX) with an Overweight rating and set a price target of $83.00. The firm highlighted the company's strong revenue and earnings per share (EPS) growth prospects, expecting Skechers to achieve an approximate 20% compound annual growth rate (CAGR) in EPS over the next three years. This forecast positions Skechers at the top of its softline retail peers in terms of growth potential.
The analyst from Wells Fargo pointed out that Skechers' projected revenue CAGR of around 11% over the same period also ranks it highly among competitors, second only to Deckers Outdoor (NYSE:DECK) Corporation. The firm anticipates that as Skechers continues to demonstrate its capacity for growth, there will be an expansion in its market multiple.
Skechers' growth story is seen as particularly compelling due to its combination of top and bottom line expansion opportunities. The firm believes that the market has yet to fully appreciate the footwear company's potential and expects recognition to increase as Skechers maintains its growth trajectory.
Wells Fargo's positive outlook for Skechers is based on detailed analysis and comparisons within the industry. The firm's endorsement suggests confidence in the company's strategy and future performance in the competitive softline retail sector.
The new price target of $83.00 represents a significant endorsement of Skechers' financial health and market position. Investors and market watchers will likely monitor the company's performance closely in the coming years to see if it meets or exceeds the growth expectations set by Wells Fargo.
In other recent news, Skechers USA Inc . has seen significant developments. UBS maintained its Buy rating on Skechers, setting a price target of $88.00, with the footwear company projected to reach $10 billion in revenue by 2026. Analysts at UBS predict a compound annual growth rate of approximately 15% in earnings per share over the next five years.
Concurrently, BofA Securities upgraded Skechers' stock from Neutral to Buy, raising the price target to $87.00, influenced by an improving wholesale environment and stronger footwear trends.
Skechers reported a record-breaking first quarter in 2024, with sales hitting $2.25 billion, a 12.5% increase from the previous year. The company's gross margin improved to 52.5%, and the operating margin reached 13.3%. As part of its expansion strategy, Skechers opened 52 new company-owned stores and 95 third-party stores in the first quarter, with plans to open between 155 to 170 new stores in 2024.
InvestingPro Insights
Complementing Wells Fargo's optimistic view on Skechers USA (NYSE:SKX), real-time data from InvestingPro aligns with the positive forecast. Skechers' market capitalization stands robust at $11.26 billion, underpinned by a solid P/E ratio of 19.16, which is attractive when paired with near-term earnings growth. The P/E ratio has seen a slight adjustment in the last twelve months as of Q1 2024, now at 18.95, while the PEG ratio of 0.43 indicates that the stock may be undervalued relative to its earnings growth.
InvestingPro Tips suggest that Skechers is trading near its 52-week high, reflecting a strong market sentiment. Additionally, the company's liquid assets surpassing short-term obligations and a moderate level of debt contribute to its financial stability. With analysts predicting profitability for this year and a profitable track record over the last twelve months, Skechers demonstrates a compelling investment profile. Moreover, the company has delivered a strong return over the past three months, with a 20.57% price total return, reinforcing its growth narrative.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/SKX. These tips can provide further guidance on Skechers' financial health and investment potential. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription for even more insights.
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