Skechers’ (SKX) weak second-quarter results and disappointing guidance were followed by rating cuts and target price revisions from Wall Street analysts. Analysts were particularly bothered about the company’s rising operating expenses, which increased at almost twice the rate of sales during the quarter.
Susquehanna lowered Skechers to “neutral” from “positive” on July 20 and reduced the target price from $40 to $26. “While we are confident that management continues to work to improve the Skechers brand, we believe it would be prudent to better align shareholders’ and management’s interest,” wrote Susquehanna analyst Sam Poser.
Wells Fargo also downgraded Skechers from “outperform” to “market perform,” and lowered the target price to $24 from $40. Analyst Tom Niki is concerned about Skechers’s deteriorating margins and uncertainty looming around its earnings. “We no longer have confidence in the earnings trajectory of Skechers,” he added.
Target price revisions
Wedbush reiterated its “neutral” stance on Skechers, although it cut the target price from $33 to $28. Analyst Christopher Svezia said that the company was focusing more on sales growth than profits. He doesn’t see much changing for the company in the medium term.
Cowen and Company analyst John Kernan also lowered his price target on the company to $32 from $41. He said that Skechers has just been growing sales and inventory. Recently, the company hasn’t been able to generate profits and cash flow.
Skechers has an average target price of $33, which reflects an upside of 26% over the next 12 months.
Next, we’ll discuss how analysts rate Skechers.