Birkenstock gets Wall Street's top rating on capacity boost, expansion

(Reuters) - Wall Street brokerages largely initiated Birkenstock with their top ratings, pointing to a likely boost from the German luxury sandal maker's recent investments to increase capacity, expansion into newer styles and brand loyalty.

Birkenstock's shares dropped to as low as $35.83 in the days after listing on Oct. 11 and has traded below the IPO price of $46 apiece. Along with lackluster share moves post-debut from chip designer Arm Holdings, grocery delivery app Instacart, and marketing automation firm Klaviyo, it doused hopes for a U.S. IPO market resurgence.

The company's shares edged up nearly 1% to $41.54 after opening lower on Monday, as many of the 22 underwriters, including J.P. Morgan and Goldman Sachs, started coverage following the expiry of the mandated quiet period.

Citigroup was among the most bullish, with a price target of $52, a more than 26% jump from the last close. Jefferies closely followed with a target of $50.

"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," analysts at Jefferies said.

Telsey Advisory Group analysts said Birkenstock has further avenue to expand into footwear categories such as orthopedics and professional, outdoor and active, kids, home, and sneakers.

At current levels, Birkenstock has a market value of about $7.7 billion, compared with the $4.35 billion that L Catteron, the U.S. private-equity firm backed by French billionaire Bernard Arnault and his luxury goods empire LVMH, paid to buy a majority stake in the shoemaker in 2021.

But not all analysts were optimistic.

"While we view it as a strong brand with unique attributes, we think outsized growth on top of the robust recent trends will be difficult," BofA Global Research analyst Lorraine Hutchinson wrote in a note.

Morgan Stanley assigned a price target of $41 and an "equal-weight" rating, saying most catalysts were already priced in.

"It all comes back to the appropriate pricing of a niche consumer-facing company in an environment where consumer spending likely gets pulled back a bit," said Art Hogan, chief market strategist at B. Riley Wealth.

Brokerage Rating Price

Target

HSBC Hold $42

JP Morgan Overweight $48

Jefferies Buy $50

Morgan Stanley Equal-weight $41

Goldman Sachs Buy $48.50

Bernstein Market-perform $37.15

Telsey Advisory Outperform $47

Group

Citigroup Buy $52

Stifel Buy $47

BMO Capital Outperform $50

Markets

William Blair Outperform NA

Deutsche Bank Hold $43

BofA Research Neutral $44

(Reporting by Reshma Rockie George, Susan Mathew and Savyata Mishra in Bengaluru; Additional reporting by Amruta Khandekar, Editing by Maju Samuel and Sriraj Kalluvila)