Predominantly positive initial assessments from analysts gave Birkenstock shares a boost in premarket trading on Monday. The German shoe manufacturer’s shares continued their strong recovery of almost 7 percent since Thursday on the Tradegate trading platform. However, they are still trading significantly below the issue price of $46.
Birkenstock shares gained up to one percent to $41.64 in premarket US trading. They ended up back at Friday’s daily high. None of the analysts who have been evaluating the stock since this weekend recommend selling. The optimists’ highest price target is $55.
About a month ago, the company had a disappointingly weak start on the New York Stock Exchange. The first price was 41 US dollars (38.70 euros) on October 11th, more than ten percent below the issue price. They then even fell to $35.83 before stabilizing.
Traditional company with a strong management team and diverse growth potential
The sandal manufacturer is a traditional company with a strong management team and diverse growth potential, wrote JPMorgan analyst Matthew Boss and rated the share “overweight” with a price target of $48. “Since the election of Oliver Reichert as the new CEO, Birkenstock has undergone a significant change. It has changed from a family-run, product-oriented company to a global shoe brand with a broad portfolio,” said his colleague Randal Konik from the analysis house Jefferies.
Konik also highlighted the “loyal customer base,” the concept of keeping the various production levels within the group, and the various sales channels. All of this should help expand the addressable market and maintain profitability, he expects, rating the stock a Buy with a target of $50.
Louise Singlehurst, an analyst at Goldman Sachs, also expects that new production capacity will help increase market share and accelerate growth. She expects Birkenstock to achieve a conservative average growth of 18 percent by 2026 and her expectations are similar to JPMorgan expert Boss.
She also refers to the company’s largest markets: “In the 2022 financial year, Birkenstock produced a total of 29 million pairs of shoes, with America being the largest market with 54 percent of sales, followed by Europe with 36 percent.” Supported by an easing of delivery bottlenecks and the simultaneous introduction of new production capacities, it sees a good opportunity for further market share gains and growth opportunities in the areas of shoes for specific professions and shoes for children.
UBS analyst Jay Sole also sees strong growth potential for the manufacturer from Linz am Rhein. According to him, however, this is already sufficiently priced into the share price. In addition to his neutral base rating, he also sees further growth opportunities in Asia in an optimistic scenario. However, in a pessimistic scenario, growth could slow. He sees the main danger here in failing to meet expectations in products that do not belong to the core category, such as closed shoes and foam shoes made from ethylene vinyl acetate (EVA).
The main criticism of the IPO a month ago was that Birkenstock wanted to use its share of the proceeds from the IPO to reduce debt. Analyst Michael Hewson from the London securities firm CMC Markts criticized this as “unambitious”. What was also criticized was the rating, which was around four times as high as that of the cult boot manufacturer Dr. Martens.
Birkenstock the “shoemaker dynasty”
According to the company, Birkenstock’s origins date back to 1774. Almost 250 years ago, shoemaker Johannes Birkenstock laid the foundation for “a shoemaker dynasty.” The company describes itself as the “inventor of the footbed”. The sandals gradually broke away from their former eco-slipper image and have increasingly developed into a fashion accessory in recent years, also through collaborations with high-end brands such as Dior and Manolo Blahnik. The IPO in October brought a total of almost $1.5 billion into the coffers. However, around two thirds of this went to the main owner L Catterton, who is linked to the luxury group LVMH. (dpa)