Deckers Stock Recovers on Strong Earnings—More Upside Ahead?

Core Viewpoint - Deckers Outdoor has shown signs of recovery in fiscal Q1 2026, with significant revenue growth and improved earnings, despite challenges from tariffs and a decline in U.S. sales [1][3][6]. Financial Performance - Deckers reported a revenue growth of 17%, surpassing the analyst forecast of 9.2% [3] - Adjusted earnings per share (EPS) grew by 24%, reaching 93 cents, contrary to expectations of a 10% decline [3] - International revenue surged by 50%, driven by strong performance from HOKA and UGG brands, marking the fastest growth in six quarters [4] - U.S. sales, however, fell nearly 3% in a challenging consumer environment [4] Margins and Costs - Gross margin decreased by 110 basis points to 55.8%, while operating margin increased by 105 basis points to over 17.1% [5] - The company has not seen negative impacts from initial price increases implemented on July 1, indicating potential for maintaining demand despite higher prices [8] Market Conditions and Tariffs - The sentiment around Deckers has been affected by tariffs, with the U.S. tariffs on Vietnam currently at 20%, a significant reduction from previous proposals [6][7] - Management has expressed optimism that price increases have not adversely affected demand, which is a positive indicator for future performance [8] Sales Channels - Direct-to-consumer (DTC) sales showed minimal growth, while wholesale sales increased by 26.7%, suggesting a potential rebound in DTC sales in the future [9] Stock Valuation and Forecast - The current stock price is $112.43, with a 12-month price target of $137.50, indicating a potential upside of 22.30% [10][11] - The stock trades at a forward P/E multiple of 18x, which is approximately 26% below its three-year average of over 24x, suggesting undervaluation [10][11]