Birkenstock Holdings Ltd (BIRK)

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Analysts Are Optimistic About Birkenstock as They Initiate Coverage on the Market’s Newest Shoe Stock
By Shoshy Ciment-Mon, November 6, 2023 at 2:45 PM EST
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Analysts had positive sentiments about Birkenstock as they initiated coverage on the market’s newest footwear stock to kick off the week.

The German company made its debut on the New York Stock Exchange in October after pricing an IPO at $46 per share, for an $8.6 billion valuation. Shares of the shoe brand fell 12.6 percent to $40.20 on the company’s first day on the market and fell another 6.6 percent to $37.55 the following day.

Amid a broader market rebound in the past week, the stock picked back up. As of Monday at 2:45 p.m., shares of Birkenstock were at $41.86.

In their notes initiating coverage, analysts highlighted Birkenstock’s brand history, loyal consumer base, product assortment and distribution model as positive assets that will help the stock increase in value over time.

In his note announcing a $55 price target, Williams Trading analyst Sam Poser chalked up the brand’s rough first days on the market to “under appreciation of Birkenstock’s heritage, culture, product, breadth of product opportunities and execution.”

This rich history, combined with strong brand management and a firm grasp of a scarcity business model, is what gives Poser confidence “the stock will be trading well higher than it is today” when it releases earnings for the first time.

“Birkenstock has proven over the last 10 years (that it can) meticulously drive consistent sales growth with industry leading margins,” Poser wrote.

Jefferies analyst Randal Konik also highlighted Birkenstock’s reputation as a “historic brand with a loyal customer base” in his note giving the stock a $50 price target.

“We believe the company’s evolution into a universally known brand with a loyal customer base speaks to the company’s ability to continue to adapt and develop new silhouettes to maintain existing customers while also attracting new ones,” wrote Konik. “Moving forward, we believe the company can leverage its well-known brand, and its vertically integrated multi-channel distribution model to further improve brand awareness and increase its addressable market.”

In the prospectus document filed for its IPO, Birkenstock noted its engrained presence with certain consumers and said that the feminist movement spurred demand for Birkenstock as early as the 1990s, when women took to the sandals to “free themselves from long-standing fashion norms that required wearing painful high heels and other constricting footwear.” More recently, Birkenstock played a central role in the box office smash hit, “Barbie,” which sparked a 110% increase on searches for Birkenstock Arizonas following its release, according to Lyst.

BMO Capital Markets analyst Simeon Siegel said there is still more runway for growth in within core business, product extension and geographic expansion in his note announces a target price of $50 and an “outperform” rating for the stock.

“We believe Birkenstock represents a brand with significant top-line whitespace ahead,” Siegel said, also noting Birkenstock’s “proven track record of consistently growing average selling price.”

Another benefit to Birkenstock, Stifel analyst Jim Duffy pointed out, is its operating model, which consolidates most of its product manufacturing in German facilities. This allows for “complete oversight of quality control throughout the production process, and insulation from potential upstream supply challenges,” Duffy said.

“The unique vertically integrated European operating model prioritizes distribution quality and supply chain control, compared to the industry standard of sourcing product primarily from Asia,” Duffy wrote.

International expansion is another area of opportunity for the brand, read a note from HSBC Global Research.

“It appears that BIRK’s awareness is very low outside of four key countries: Germany, the US, the UK and France,” read the note. “And this means that, on paper, the brand could become much bigger in years ahead if it manages to build on that awareness more broadly.”





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