Update:
We are moving our DECK Black Book to next Wednesday, as we have new data and analysis that we're fleshing out as it relates to HOKA wholesale distribution -- particularly at DKS. We will be listening intently for more color on the DKS and HOKA partnership on the DKS earnings call tomorrow. Currently we estimate that HOKA is in 200+ DKS stores with more doors coming, which compares to the last mention of the partnership by DECK in July 2021 which talked about 40 doors.
Original Invite:
We added DECK to Best Idea Long list last month, and the more work we do on the name, the more we think that growth will surprise to the upside over a TREND and TAIL duration due to the sheer brand heat that the HOKA brand is churning out. We’re coming out ahead by about 10% in the March quarter (Q4), and then over a TAIL duration we’re looking at EPS of $33 vs the Street at $24. We think the beats will come entirely from the top line (and to a lesser extent, excess cash flow driving the share count lower), and while the HOKA DTC model should continue to grow 30%+, we think that people are underestimating the wholesale penetration opportunity – especially at DKS and FL. As the growth comes in ahead of estimates, we think that HOKA will start to get a real multiple. Even if we give it half the 50x EBITDA multiple that ONON currently has, we get to HOKA accounting for ~$300 in share price in a year, which is ~20% higher than the entire value of DECK today. That means that at the current $245 price, you’re getting the Ugg brand – which is one of the best high-margin cash cows in retail -- for free (Ditto for Sanuk and Teva, though admittedly they’re rounding errors in the grand scheme of DECK). Our sum of the parts model gets us about $390 in a year, or better than 50% upside, and $500-$600 over a TAIL duration – more than 2x where the stock is today. We get that stocks don’t trade on SOTP models, but we think that the growth and earnings catalysts will be there to support the intrinsic value of the different parts. Our Black Book will fully outline our Best Idea thesis on the name.
Updated Call Details
Date/Time: Wednesday March 16th at 11:30 EST Add To Calendar: CLICK HERE
Toll Free:
Toll:
UK: 0
Confirmation Number: 13727625
Live Video Link: CLICK HERE
