Baby, it's cold outside! Winter will be here (at least for those of us in the Northern Hemisphere) in a few weeks. So is it any surprise that shares of Deckers Outdoor (DECK), the maker of the popular (although not entirely aesthetically pleasing) fuzzy boot are rallying?
Shares of Deckers were up nearly 8% Monday, continuing a sharp move up from their 52-week low. The stock has gained nearly 45% since the start of November. But Deckers shares are still down more than 45% this year as investors began worrying over the summer about weakening demand before the holidays. In fact, I last wrote about Deckers in September after Sterne Agee analyst Sam Poser issued a bearish report on the company that sent the stock tumbling.
Well guess what? Poser upgraded Deckers Monday and that appears to be the main reason investors are flocking back to the stock. The fall and rise of Deckers has generated a fair amount of chatter over on StockTwits -- although not as much as Kate Middleton's pregnancy on Twitter of course.
One trader noted the seasonal effect that I alluded to at the top of this story. UGGs naturally are more popular as the mercury starts falling.
Several other traders suggested the worst may be over. One of the biggest knocks on the stock before its pullback was that it was way overpriced. With shares now trading at just 11 times 2013 earnings estimates, that's no longer an issue.
True. Although this could continue to be a volatile stock for some time. Poser is more optimistic about the holiday shopping season for 2013 ... but if you look more closely at this note, he's still concerned about this year. He wrote that "given current trends we continue to believe that sales and earnings will remain challenged through 2Q13, and inventories will remain elevated until 2Q13."
Poser is basing his upgrade on the notion that the company will release better products next year. He may be right. But fashion is notoriously fickle.
With that in mind, Deckers may still have a lot to prove.
Good point about Tiffany (TIF), which recently warned about tough times ahead.
And VF Corp. (VFC), owner of The North Face, Timberland and Lee brands, has been a remarkable stock this year. Shares are up nearly 30%.
None of VF's brands are likely to get featured on the likes of "Project Runway." But it does go to show that comfort is often as important as couture. Heck, Mitt Romney and Paul Ryan were each spotted wearing The North Face jackets on the campaign trail.
Finally, I wondered why Deckers continues to use DECK as its ticker symbol and hasn't succumbed the urge to go with the more cutesy (but also appropriate) symbol of UGG? Analyst Brian Sozzi had an interesting theory.
Interesting. If Poser is right about the company having more hits in 2013, Deckers probably won't need to look for a sale. But if the stock's rebound stalls, maybe it will be time to look for a suitor.
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