August 26, 2022, Skechers U.S.A., Inc. (NYSE:SKX) and Boot Barn Holdings, Inc. (NYSE:BOOT)
These two STRONG BUY apparel plays are the best stocks to buy now.
In anticipation of Fed Chair Jay Powell’s testimony at Jackson Hole and following an upwards revision to Q2 GDP figures, the market rose for a second consecutive day. The Dow jumped over 320 points (+0.98%), the S&P gained 1.42%, and the Nasdaq rose 1.67%. As the market figures things out, Skechers U.S.A., Inc.(NYSE:SKX) and Boot Barn Holdings, Inc. (NYSE:BOOT) look like the best stocks to buy now.
For over 30 years, Skechers has built itself into a cheap, casual footwear giant rivaling expensive peers. It just reported record quarterly revenue and is proving its value. With solid fundamentals at a reasonable valuation and long-term outperformance, there’s a reason why Morgan Stanley said to “run, don’t walk” into the stock and why its $59.00 price target represents a 48.65% upside.
Boot Barn Holdings is also on this list of best stocks to buy now because of recent insider activity indicating the stock’s about to break out. The country’s largest Western wear retailer continues to see soaring year-over-year sales and strong margins. Yet the stock trades at a deep discount, and Craig-Hallum analyst Jeremy Hambling’s $120 price target indicates a 65+% upside.
Pick either stock- it’s a win-win. Both have unique positioning in retail and apparel and offer different potential as the best stocks to buy now.
Skechers U.S.A., Inc.(NYSE:SKX)
This undervalued, STRONG BUY footwear giant, could have an almost 50% upside.
Over the last three decades, Skechers has become one of the largest American footwear brands and a comfortable, cheaper alternative to pricier competitors. With a wide range of affordable shoes, sandals, slippers, and other kinds of footwear for men, women, and children, Skechers has a massive addressable market.
How many hundred-million people probably categorize themselves as “inflation-weary”?
It also has quite the retail footprint with 4,306 company and third-party-owned Skechers stores as of December 31, 2021.
But now that that background info is covered let’s get into the meat and potatoes. Why is this shoe company one of the best stocks to buy now?
For one, the Company is well-run. It has strong fundamentals and reported record-high revenues in its latest quarterly earnings report.
Moreover, despite being a long-term outperformer and recently going on a monthly 18.44% rally, it still trades closer to its lows than highs and with deep value.
However, we aren’t the only ones who see Skechers as one of the best stocks to buy now. Some whales do, too, as illustrated by the whopping 455,696 shares (roughly $17.77 million) that Ken Griffin, the billionaire founder of hedge fund Citadel, purchased in Q2.
Record Quarterly Revenue With More Room to Run
Skechers announced its Q2 earnings data on July 26, 2022, and did so in style.
Impressively enough, EPS came in at $0.58, topping the consensus estimate of $0.54 by $0.04.
However, Skechers’s $1.87 billion record-setting quarterly revenue was the highlight. It also marked a 12% year-over-year increase and included an 18% gain in wholesale sales.
Perhaps that explains why its earnings could grow by a whopping 25.38% in the coming year and why its revenue could increase at a 12.0% 5-year CAGR.
A Surprising Discount With Strong Fundamentals That Keep Getting Stronger
Skechers has had strong returns over the last decade and certainly does not appear to be a bottom-feeding play on the surface.
However, Skechers is one of the best stocks to buy now because it has surprisingly deep value based on the following multiples:
Adding to its case as an undervalued player in textiles, apparel & retail, Skechers also has several impressive fundamental margins, like its 12.6% ROA, 47.9% gross margin, and 23.3% ROCE.
The best part? Skechers ended the quarter with an even more improved balance sheet. Skechers reported having $946.4 million in cash and liquid assets at the end of Q2. Year-to-date, Skechers also noted that it repurchased $49.2 million worth of shares, nothing but a minor dent in the Company’s $450.8 million share repurchase program.
A STRONG BUY With an Almost 50% Upside
According to TipRanks, SKX is a STRONG BUY. A unanimous consensus of 9 out of 9 Wall Street analysts offering 12-month price targets for Skechers in the last 3 months rated it a BUY. Based on these analyst ratings, SKX currently has a high price target of $60.00, a low of $42.00, and an average of $50.33. The average price target represents a 26.81% upside from August 25, 2022’s $39.69 close.
However, Morgan Stanley analyst Alexandra Straton sees more upside for the SKX stock. On July 27, 2022, she proclaimed how unapologetically bullish she is, giving Skechers an OVERWEIGHT rating and $59.00 price target, representing a potential upside of 48.65% as of August 25, 2022’s.
“Run, don’t walk,” she said, due to three catalysts.
- Room for positive EPS revisions
- Clear valuation re-rating opportunities
- Potential perks from a deteriorating macroeconomic environment due to its focus on value.
SKX’s year-to-date low and high are $33.50 and $49.89, respectively.
Boot Barn Holdings, Inc. (NYSE:BOOT)
Craig-Hallum sees a 65+% upside as insider activity goes all-in on the country’s largest Western wear retailer.
If niche apparel is your thing, Boot Barn is your pick for one of the best stocks to buy now.
Boot Barn is the largest Western wear apparel provider in the U.S and operates online and in-person with a footprint of 311 stores across 38 states.
Business keeps chugging along, too, as it just opened up 11 new stores in its most recent quarter. For good measure, the Company also reported strong year-over-year sales growth.
The fact that the stock has rallied 24.25% in the last month yet trades -42.83% below its highs with attractive multiples makes it a clear contender as one of the best stocks to buy now.
After all, with the amount of colossal insider buying activity the stock’s seeing, and 65+% upside from a recent Craig-Hallum price target, we’re not the only ones saying that.
Growing Store Sales That Could Keep Soaring
BOOT’s recent earnings report from July 27, 2022, displayed strong revenue growth.
We do not doubt that EPS coming in at $1.29 and beating estimates by $0.14 is impressive in its own right. Especially with earnings projected to rise another 6.46% in the coming year.
It’s just that its revenue growth was the highlight.
While BOOT’s $365.9 million revenue missed analyst estimates, it still marked a roughly 19% year-over-year increase. Moreover, highlighting this revenue growth were the following year-over-year increases:
- 10% growth in same-store sales
- 10.1% increase in brick-and-mortar same-store sales
- 9.3% increase in e-commerce
The momentum behind its rising sales might not be over, either. Finbox projections show revenue could continue increasing at an 18.8% 5-year CAGR.
Outstanding Financials at a Discount
Despite the stock’s month-long momentum, it trades at a deep discount. How long that lasts is anyone’s guess, but it trades almost 43% below its highs and has an 11.3x trailing P/E, 11.6x forward P/E, and 0.13 PEG. These figures suggest a deep discount and a buyable company that’s one of the best stocks to buy now.
Boot Barn also has a solid 7 out of 9 Piotroski Score, indicating healthy Liquid Balance Sheets, Profitability, and Operating Efficiency. Its strong margins back up the score as well.
Bullish Insider Activity and an Improving Sentiment
BOOT is one of the best stocks to buy now because of what’s happening underneath the surface. Based on insider buying activity and trends in short interest, it’s evident that those in the know see big things for the Company.
On the insider front, this month alone, three prominent Company officers made ‘informative buys.’
Informative buys, however, aren’t just any insider activity. Informative buys occur when a Company insider purchases stock with their very own capital. If that’s not a proclamation of confidence in the direction of a company, then what is?
Here’s what the BOOT insiders did this month:
- Peter Starrett of the Board of Directors bought 4,000 shares for $283,480
- Chris Bruzzo of the Board of Directors bought 1,532 shares for $100,515
- James Watkins, CFO, bought 2,500 shares for $152,075
Reflecting the bullish insider sentiment is the recent and dramatic 19.22% decline in the stock’s short interest, indicating a massive improvement in investor sentiment.
Craig-Hallum Sees a 65+% Upside
Like Skechers, TipRanks rates BOOT a STRONG BUY. 8 out of 9 Wall Street analysts offering 12-month price targets for BOOT in the last 3 months rated it a BUY. Based on these analyst ratings, BOOT currently has a high price target of $127.00, a low of $70.00, and an average of $101.11. The average price target represents a 39.08% upside from August 25, 2022’s $72.70 close.
However, Craig-Hallum analyst Jeremy Hamblingave gave a BUY rating and $120 price target on July 28, 2022, indicating that he sees the stock potentially moving over 65%.
Why? In his words, BOOT’s latest earnings results were ‘exceptional.’ He highlighted BOOT’s deep discount, cheap P/E ratios, and outstanding risk/reward potential.
BOOT’s year-to-date low and high are $58.51 and $105.66, respectively.