Wall Street starts Birkenstock with top rating, flags limited upside

BROKERAGES including JPMorgan and Goldman Sachs have started coverage on Birkenstock, with most of them assigning their top ratings as they bank on brand loyalty and easing supply chain issues at the German luxury sandal maker.

Birkenstock made its New York Stock Exchange debut last month at US$41, below its initial public offering (IPO) price. The company priced its IPO at US$46 per share, in the middle of its indicated price range.

The listing had nearly two dozen underwriters, all of whom had to wait until this weekend to start coverage, as required by industry practice.

Jefferies is among the most bullish, expecting the stock to end next year at US$50, which represents an over 21 per cent jump from current levels.

“Given its historic brand and loyal customer base, we believe the company is well-positioned to drive strong top-line growth, maintain its attractive margin profile, and expand its addressable market,” said analysts at Jefferies.

Goldman Sachs sees an opportunity for market share gains, supported by the easing of supply constraints, as well as Birkenstock’s pricing ability.

JPMorgan said it expects the management’s mid-to-high teens annual revenue growth forecast to be a “prudent” baseline.

But not all analysts are as optimistic. Morgan Stanley is sceptical of any upside, assigning a price target of US$41 and an “equal-weight” rating, as it sees most catalysts as already priced in. HSBC analysts, meanwhile, expect recent production investments to weigh on gross margin.

Price targets from other brokerages ranged between US$42 and US$48.50.

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Birkenstock shares fell in the days after its debut on Oct 11, dropping as low as US$35.83, following in the footsteps of marquee names such as chip designer Arm Holdings, grocery delivery app Instacart, and marketing automation firm Klaviyo, whose lackluster share moves post-debut have doused hopes for an IPO market resurgence.

Birkenstock has since recovered, but barely breached its debut open price, closing on Friday at US$41.16. REUTERS