November 7, 2023
Most Wall Street analysts say Birkenstock Holding Plc shares are a good choice for investors, striking a bullish tone less than a month after the German shoemaker’s initial public offering was a flop. .
Now that the usual quiet period for IPO companies is coming to an end, most analysts are telling investors to buy the stock, which is down about 10% from the IPO price for its quote of October 11. Stocks were flat on Monday in New York.
Following its weak debut, which was seen as a result of poor market timing, the maker of cork-soled sandals now has 11 buy recommendations, against seven holds and no sells, data compiled by Bloomberg show. The company has an average 12-month price target of $46.51, about 13% above Friday’s close of $41.16 and compared to the IPO price of $46.
“A comfortable investment,” is how BMO Capital Markets analyst Simeon Siegel described the stock in a note giving it an outperform rating. He cited future potential through growth of its core offering, product extension and geographic expansion.
Piper Sandler analysts Edward Yruma and Abbie Zvejnieks were similarly optimistic. They noted that while Birkenstock will benefit in the short term from fashion trends, areas such as wellness and crafts are set to be a key growth driver for next year.
“Birkenstock has unique characteristics as both a luxury brand and a performance footwear brand, which differentiate it from the brands within our broader coverage,” they wrote in a note rating the stock as overweight.
Last month, Birkenstock stumbled in its trading debut, falling 12.6% in what was, at the time, the worst first day for a $1 billion or more U.S. listing in more than two years, data shows compiled by Bloomberg.
Some banks were less optimistic.
“Birkenstock’s share story has a number of attractions from a financial standpoint,” wrote Morgan Stanley analysts led by Edouard Aubin, highlighting what they said is industry-leading profitability and free cash flow in expansion.
However, Aubin rated the stock with equal weight and considered these positives to be “largely priced in.”
At HSBC Holdings Plc, Erwan Rambourg praised the company’s fundamentals and said its lack of exposure to China was a “silver lining” as the economic backdrop there is making some investors nervous.
However, the analyst gives the stock a hold based on valuation, which he says does not look compelling at current levels.
“Are rocky starts likely to hurt stocks in the long run? Not necessarily: as the fundamentals are powerful, a slightly more acceptable valuation level could make this a good long-term option,” Rambourg wrote in a note.