Argus Research has reaffirmed its BUY recommendation on Skechers USA Incorporated (NYSE: SKX), citing favorable valuation metrics, strong international momentum, direct-to-consumer strength, and ongoing product innovation. Despite a recent earnings forecast adjustment and short-term operational challenges, Skechers remains well-positioned for revenue expansion and margin improvement. The stock trades at an attractive multiple relative to its historical average, offering significant upside. Argus has set a revised 12-month target price of $55, suggesting a 15% appreciation potential from current levels. Investors are encouraged to view the recent price dip as a buying opportunity, with long-term growth underpinned by expanding global markets and brand strength.

Investment Thesis: Skechers Poised for Upside Despite Short-Term Headwinds

Argus Research maintains a BUY rating on Skechers, emphasizing the company's resilience amid shifting economic conditions. Despite lowering their 2025 EPS estimate to $4.00 from $5.02 and adjusting 2026 EPS to $4.40 from $5.40, analysts believe Skechers' valuation at 13.2-times 2025 earnings remains compelling compared to its five-year average multiple of 17.

Strategic initiatives—including price adjustments, expansion into emerging markets like China and India, and improvements to retail and online platforms—are expected to sustain revenue growth. Coupled with consistent share repurchases, these strategies are projected to fuel future earnings momentum.

Recent Developments: First-Quarter Beat and Guidance Withdrawal

Skechers reported Q1 2025 results that exceeded expectations, with EPS rising to $1.34 versus $1.33 a year earlier, topping consensus estimates of $1.18. Revenue grew 7.1% year-over-year to a record $2.41 billion, outperforming the consensus forecast of $2.24 billion.

While wholesale revenue increased by 7.8% and direct-to-consumer sales rose 6.0%, the gross margin declined by 50 basis points to 52%, slightly missing expectations. Operating margins narrowed to 11% from 13.3%, yet still exceeded internal forecasts. Notably, Skechers withdrew full-year 2025 guidance, contributing to recent stock volatility.

Financial Strength: Balance Sheet Remains Robust

Skechers maintains a Medium-High financial strength rating from Argus, underpinned by ample liquidity and conservative leverage. The company ended Q1 2025 with $1.1 billion in cash and short-term investments, down modestly from year-end 2024. Inventory levels were also tightly managed, decreasing by $146 million year-to-date.

The debt-to-capital ratio stood at a manageable 28.6%, and the current ratio remained healthy at 1.97. Skechers does not pay a dividend, opting instead to prioritize reinvestment and share buybacks.

Management and Risks: A Double-Edged Sword

Leadership remains a stabilizing force, with Robert Greenberg as CEO, Michael Greenberg as President, David Weinberg as COO, and John Vandemore as CFO. The Greenberg family continues to exercise significant voting control, providing continuity but also concentration risk.

Key risks include macroeconomic pressures affecting consumer spending, intense competition in the footwear industry, ongoing legal disputes (such as the Nike lawsuit), and inventory mismanagement risks. Customer concentration also remains a concern, as the top five clients represent up to 18% of total sales.

Valuation Metrics: Attractive Discount to Historical Averages

SKX shares currently trade at a discounted valuation, with a forward P/E ratio of 13.5-times 2025 EPS, versus the five-year average of 17. Price-to-sales and price-to-book ratios stand at 0.69 and 1.39, respectively, indicating room for multiple expansion as margins stabilize and international growth accelerates.

Given these metrics, the revised target price of $55 offers approximately 15% upside from the recent closing price of $47.79.

Competitive Landscape: Skechers Holds Its Own Among Global Players

Compared to peers like Nike (NKE), Ralph Lauren (RL), and Tapestry (TPR), Skechers offers a compelling value proposition with a lower P/E multiple and a forecasted 5-year EPS growth rate of 12%. While competition remains fierce, Skechers' diversified product portfolio and global reach position it favorably within the consumer discretionary sector.

Moreover, Skechers has outpaced consensus earnings estimates in 10 of the past 11 quarters, signaling strong execution even amidst industry challenges.

Outlook: Solid Foundation for Sustained Growth

Revenue is projected to grow by approximately 9% in 2025 and another 8% in 2026, driven by wholesale expansion and direct-to-consumer gains. Although tariffs are expected to weigh on near-term margins, long-term structural improvements—including a focus on emerging markets and product innovation—should underpin double-digit earnings growth.

Argus projects a long-term earnings growth rate of 12%, aligning with historical performance and industry dynamics.

Key Levels and Target Price

Current Price: $47.79

12-Month Target Price: $55.00

Support Level: $44.50

Resistance Level: $59.65

At the revised target, the valuation reflects improved profitability forecasts and a favorable global macro backdrop for discretionary consumer spending.

Conclusion

Skechers offers a compelling risk-reward profile at current levels, benefiting from operational strength, strong international tailwinds, and favorable valuation. While near-term volatility is likely following the withdrawal of 2025 guidance, the longer-term fundamentals remain robust. Investors seeking exposure to a value-oriented growth stock in the consumer discretionary sector may find Skechers a timely addition to their portfolios.

Disclaimer:
Investors are advised to conduct their own due diligence or consult a registered financial advisor before making any investment decisions. Stock market investments carry inherent risks, and past performance is not indicative of future results.