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Investing.com -- BTIG analysts downgraded Deckers Outdoor (NYSE:DECK) from Buy to Neutral on Tuesday, citing signs of slowing growth across its key UGG and HOKA brands.
With holiday season trends looking softer and competition in the running shoe market increasing, BTIG sees limited upside for the stock at its current valuation.
“We now see [the] risk/reward as more balanced,” BTIG wrote, adding that early indicators suggest “a slower start to holiday for UGG,” with any potential upside likely driven by wholesale sales rather than direct-to-consumer (DTC) channels.
The analysts expressed concern that "wholesale-driven upside is not well-received by investors at current valuation levels."
The report also highlighted signs that HOKA’s multi-year growth is beginning to moderate.
Competitors are playing catch-up, BTIG noted, with some signs of market share loss in the specialty running segment over the past month. While Deckers continues to execute well, "some rare product execution missteps" have opened a window for competition to accelerate innovation.
BTIG flagged multiple data points showing slower momentum for both brands. For UGG, credit card data indicated a decline in DTC sales, particularly in September, with web traffic to UGG.com also down 3% year-over-year.
Meanwhile, the firm notes that HOKA’s search interest flattened, and although DTC sales remained in double-digit growth, the pace has decelerated significantly from earlier in the year.
Despite Deckers' solid long-term potential, the stock’s premium valuation makes it vulnerable to even minor setbacks, according to BTIG.
"Shares continue to trade at multiples ~30% ahead of 5-year averages," they wrote, suggesting the stock may be at risk of reversion if growth moderates further.
While BTIG remains optimistic about the long-term outlook for both UGG and HOKA, they believe a cautious approach is warranted in the near term.
The firm concluded that it feels "more comfortable on the sidelines."
