Investing.com — HSBC upgraded Birkenstock Holding ltd (NYSE:) to “buy” from “hold,” citing long-term growth potential, easing margin pressures as the footwear brand scales investments. Brokerage also raised target price on the stock to $60, representing a 17% upside.
While Birkenstock shares have faced pressure amid concerns over a slowdown in direct-to-consumer sales, HSBC shrugged off concerns with robust growth in wholesale channels and expansion opportunities in Asia.
Brokerage expect significant growth in Asia, where the climate makes the brand a natural fit, and margins should improve as scale builds.
The brand’s diversification into closed-toe shoes, which now account for over 30% of sales compared to 11% five years ago, is helping to reduce seasonality and lift average selling prices. HSBC also highlighted Birkenstock’s minimal exposure to China as an attractive feature for investors seeking diversified growth stories.
The bank acknowledged concerns about valuation and liquidity but argued that doubts over Birkenstock’s growth trajectory were overblown. “We don’t subscribe at all to the idea that sales for the brand have peaked in any market,” analysts wrote, projecting DTC sales to outpace wholesale growth in FY25.
HSBC’s revised forecasts align with management’s guidance, with Q4 FY24 sales expected to grow 18% year-on-year. Despite near-term challenges, the analysts see Birkenstock well-positioned for sustained growth, supported by product innovation and regional expansion.
