Ugg Parent Company Decker Outdoors No Longer A Good Fit, Says Pivotal Research

Shares of Deckers Outdoor Corp DECK, the parent company behind multiple brands including UGG boots, have gained 70 percent over the past year — and now might be a good time for investors to move to the sidelines, according to Pivotal Research Group.

The Analyst

Pivotal Research Group's Mitch Kummetz downgraded Deckers Outdoor rating from Buy to Hold with a price target lowered from $122 to $108.

The Thesis

A bullish stance on Deckers' stock consisted of a belief the company is well-positioned to take advantage of a favorable winter season and a favorable risk-to-reward profile, Kummetz said in the downgrade note. But these two catalysts have since played out, and the stock's gains now imply the risk-to-reward profile "no longer appears favorable," the analyst said.

Deckers' outlook remains favorable, but a handful of factors yield an outlook that is "not as bullish" as before, Kummetz said:

Checks at 60 independent footwear retailers in February found that 2018 boot prebooks aren't coming in as well as previously expected.
Retailers continue to be "more cautious" after two warm winters in 2015-16 and 2016-17.
Retailers are unlikely to overreact as positively as they would have in the past with future favorable weather trends.
The company's fiscal third quarter will prove to be a tough compare, as it is lapping a 6.4-percent two-year stack.
Stocks in general tend to lag after a strong winter, and Deckers' performance after a favorable winter "hasn't been great."