Pick Skechers over Vans-maker VFC amid uncertainty: Piper Sandler (NYSE:SKX)

Search for high quality over hypothesis, Piper Sandler mentioned, upgrading Skechers U.S.A. (NYSE:SKX) and downgrading V.F. Company (NYSE:VFC).

The agency cited uncertainty of the U.S. shopper in bumping the sneaker-maker to Obese from Impartial and upping its worth goal to $59 from $54. VFC bought downgraded to Impartial from Obese with a worth goal of $20, down from $28.

VFC dropped 4.4% on Monday morning whereas SKX was little modified.

SKX gives a clear steadiness sheet and high quality earnings development, the agency mentioned.

“We’re extra optimistic on SKX’s worldwide enterprise and gross margin construction,” analyst Abbie Zvejnieks wrote in a be aware.

“Whereas we nonetheless assume there may be inherent worth within the debt to fairness shift at VFC, we predict the turnaround for Vans will take longer than initially anticipated,” the analyst mentioned.

Skechers (SKX) cand drive earnings development with product innovation, worldwide gross sales and gross margin growth, Piper Sandler mentioned. The agency additionally sees robust underlying demand.

VFC’s turnaround technique, nevertheless, will take longer than initially anticipated, which additionally impacts VFC’s timeline on lowering leverage.

“Our unique OW thesis was based mostly on a Vans model turnaround and bettering FCF lowering leverage and powering a debt to fairness shift,” Piper Sandler mentioned.

However new kinds aren’t sufficient to fill the hole left by weak point in core classics.

VFC is down almost 37% year-to-date, whereas SKX is up 14% in that point.