Deckers Outdoor Corp. shares jumped Thursday after a Wedbush analyst upgraded her rating on the shoe company.
THE SPARK: Analyst Corrina Freedman upgraded Deckers to "Outperform" from "Neutral" after a meeting with management. She said that she now feels more comfortable with the overall outlook for the brand. She also raised the price target to $74 from $54.
THE BIG PICTURE: Deckers, based in Goleta, Calif., makes Ugg boots and Teva sandals. The company's profitability has suffered due to weaker demand and supply cost issues related to its Ugg sheepskin boots.
The company has raised the price of Ugg boots in recent years to offset big increases in the price of sheepskin and other raw materials. Those increases hurt its sales, so last fall it cut prices on some classic Ugg styles.
THE ANALYSIS: The analyst said in a research note that prior to the meeting she was skeptical of the company's ability to perform well in the fourth quarter, given conservative department store orders and shifting consumer taste for boots.
However, she is optimistic that a cold winter could benefit Deckers and believes its direct-to-consumer sales will grow, helped in part by new Ugg brand products. That includes more Ugg slippers and home products, which could help the company through the critical holiday season.
SHARE ACTION: Deckers shares increased $2.14, or 3.4 percent, to close at $66.10 Thursday. The stock traded as high as $66.52 during the session, its highest point since April 2012. Shares have more than doubled since bottoming out at $28.53 in October.