On Wednesday, BTIG maintained a Buy rating on Birkenstock Holding plc (NYSE:BIRK) and increased its price target to $70 from $60. The firm's analyst cited a robust fourth-quarter performance and a positive forecast for fiscal year 2025, highlighting the company's potential for sustained growth and margin improvement. According to InvestingPro data, the company maintains impressive gross profit margins of 60.2% and has shown strong returns over recent months.
Birkenstock reported a top-line driven fourth-quarter beat and provided solid guidance for fiscal 2025, which suggests a continuation of strong growth, with an expected 15%-17% increase in constant currency (CC) terms. The company's management is focusing on a measured and sustainable expansion strategy. With revenue growth of nearly 20% in the last twelve months and a healthy current ratio of 2.91, the company appears well-positioned for expansion.
The analyst noted several indicators of strong underlying demand for Birkenstock's products. Direct-to-consumer (DTC) sales are picking up pace, although still growing slower than wholesale. The company has also seen robust full-price sales through wholesale channels, primarily driven by gains in existing doors.
Conversations with management revealed strength in September sales, a period when other brands experienced weakness, which has carried over into a strong start for the first fiscal quarter (December quarter). InvestingPro subscribers can access 15+ additional exclusive insights about Birkenstock's financial health and growth prospects through the comprehensive Pro Research Report.
Birkenstock's international growth, particularly in the Asia-Pacific Middle East Africa (APMA) region, has been notable. Moreover, the company's closed-toe footwear line has seen significant growth, approximately doubling the overall business in 2024, and now constitutes about one-third of the product mix, up from 25% the previous year and nearly triple the levels in 2020.
The analyst concluded that Birkenstock remains an underappreciated growth story with the ability to deliver double-digit percentage top-line growth and stable or improving margins. The expectation is that as the market becomes more familiar with Birkenstock's business, the company's shares will experience a re-rating closer to those of other growth-oriented peers.
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