Skechers USA Inc (SKX) Slammed on Morgan Stanley Downgrade

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Skechers USA Inc (NYSE:SKX) is taking a nosedive today on a downgrade from Morgan Stanley. Shares of SKX are down 9.6% as of this writing, and the outlook is pretty grim — with one small ray of hope to cling on to.

Skechers USA Inc (SKX) Slammed on Morgan Stanley Downgrade

The research firm downgraded Skechers stock to “equalweight” from “overweight,” and slashed its price target from $41 to $25.

Morgan analyst Jay Sole makes the case based on shifting consumer appetites for footwear. The public, Sole notes, now prefers “pure fashion items,” and SKX must adjust accordingly to meet that demand.

Sketcher’s pivot from athletic shoes to more fashionable items are causing a delay in the company’s production, which results in “slower-than-expected sales growth and SG&A deleverage.”

SKX also faces competitive pressure from rival Adidas AG (ADR) (OTCMKTS:ADDYY) while spending more than previously thought on updating its global infrastructure. These factors, Morgan Stanley notes, normally contribute to stocks being downgraded to “underweight.”

The firm, however, notes that some of the bad news is already priced in to Skechers shares, as SKX stock trades hands at less than 13 times its updated per-share target.

“However, Skechers has orchestrated many turnarounds and adapted to many shifts in the past and we see no reason it can’t happen again,”

For the full year, Morgan Stanley expects a per-share profit of $1.85 from its previous forecast of $2.25.

And that ray of hope?

SKX stock is now down 30.5% for the year so far, and 16% over the past month alone. Shares have become egregiously oversold, with Skechers sitting well below any of its meaningful moving averages, and the Relative Strength Index (RSI) dipping below the 30 level today.

Otherwise, though, we’re not in no-man’s land, but it’s been awhile since SKX has fallen this low. This marks the first time since early 2015 that the stock has dipped this close to $20. The next price target below to look out for is $19, which acted as support twice in 2014 and 2015 before Sketchers went on its massive 2015 run.

As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/09/skechers-skx-stock-morgan-stanley/.

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