Deckers Outdoor (DECK +4.19%) slipped 3.3% through 2:50 p.m. ET on Wednesday after two separate Wall Street analysts downgraded the shoemaker's stock today.
In back-to-back reports, first Baird cut its rating on Deckers to neutral, then Piper Sandler downgraded Deckers to "underperform" (i.e., sell).
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Wall Street doubts Deckers today
Quoting from the Baird report, StreetInsider.com begins with some kind words about how Deckers might "achieve or exceed" fiscal 2026 earnings estimates and looks "undervalued" over the long term. The Ugg brand seems "healthy," and Hoka is doing well, yielding good "operating margin and cash flow generation."
Nevertheless, Baird worries Deckers isn't growing fast enough to support its "near-term multiple." Erring on the side of caution, Baird is going neutral on the stock.
Piper Sandler's concerns are even more serious. Analyst Anna Andreeva warns that, in an effort to drive growth, Deckers has "leaned into" discounting both Hoka and Ugg, potentially endangering profit margins. Sales are an "unhealthy consumer acquisition tool," writes Andreeva in a note covered on TheFly.com. Worse, they could annoy Deckers' wholesale customers who might want to charge higher prices.
NYSE: DECK
Key Data Points
Is Deckers stock a sell?
And yet... Deckers stock only costs about 16 times earnings -- both trailing and forward. Free cash flow is strong at $980 million, backing up more than 96% of reported net income. Deckers stock has no net debt -- actually, it boasts a cash balance of more than $1 billion -- such that its enterprise value to free cash flow ratio is actually cheaper than its P/E ratio: less than 15x.
If Deckers can manage even 15% annual earnings growth from this point forward, I'd say that would cheap enough to make Deckers stock a "buy."
