UGG maker
Deckers Outdoor (
DECK
)
announced earlier this week that it's teaming up with Patriots
Quarterback Tom Brady to market its famous winter boots.
Brady, who has helped the Patriots win three Super Bowls, will
now help sell UGG men's footwear, outerwear and accessories
product lines.
Deckers touted the campaign as a return to its roots, since UGGs
were originally popular among California male surfers. (Brady is
in fact from California.)
Analysts who follow the company raised their share price targets
and upped earnings estimates for next year. This boost comes on
the heels of Deckers beating analyst views for the latest
quarter, with earnings jumping 24% and sales up 22%.
Editor Michael Cintolo recently recommended DECK in Cabot Top Ten
Weekly, writing this:
"Success in retail footwear sales is largely a matter of brands,
and Deckers owns three, two of which have high visibility. The
company's top brand is UGG, a line of fashion boots headlined by
the tan sheepskin numbers that appear everywhere from ski resorts
to urban malls. Next comes Teva, an outdoor footwear company
whose history began with the creation of the world's first sports
sandal back in 1984. And then there's Simple, a line of
sustainable shoes in simply hip styles. UGG is the big dog of the
group, bringing in 70% of 2009 revenue via wholesale, and 89% if
you count the 10% of revenue from direct retail and 9% from
e-commerce sales. Teva contributed less than 10% and Simple
kicked in about 1% for the same period. UGGs have been a hot
fashion item for an unusually long time, which is a tribute to
the company's care and feeding of the brand. The company's
strategy of moving toward what its CEO calls an international
wholesale distribution model promises higher margins and
continued growth. One strong recommendation for Deckers is an
unbroken string of annual earnings growth that stretches back to
2002. The stock got a boost a couple of weeks ago when it picked
up coverage from another analyst."
Mike urged caution when buying the stock, saying it was
overextended after a great run up. The stock has only soared more
this week after the Brady announcement, but could be a good buy
again once it cools off a bit. So put it on your Watch List and
monitor it closely.
And for more top retail stocks, check out my issue from last
weekend where I discussed
10 retail stocks for the holiday season and
beyond!
---
We've written extensively in Cabot Wealth Advisory (and several
other Cabot newsletters) about
Netflix (
NFLX
)
, which has almost single-handedly revolutionized the movie
rental business. From its DVD-by-mail strategy to its online
streaming movie service, Netflix has put several
bricks-and-mortar video rental stores out of business.
And in the future, Netflix will clearly be concentrating on its
instant streaming option: It recently announced a new
streaming-only plan for $7.99 a month, while at the same time
increasing the cost of its existing DVD-by-mail plans.
But not all movies are available to stream and the company's DVDs
still have to go through the mail, meaning that it can take days
to receive the next one from your list. So what do you do when
you want to watch a movie tonight? Go to your local grocery store
(or even some McDonald's!) and get a movie from Redbox, which
lets you to check out DVDs for only $1 per night.
The red kiosks are part of Coinstar (
CSTR
), which first had success with its coin-changing machines in
grocery stores and it has now applied this strategy to movie
rentals. I wrote about the stock here in June when the stock was
trading around 50. It succumbed to the market's summer weakness,
meandering for a few months, but picked itself back up in the
fall and was recently recommended by Cabot Top Ten Weekly. Mike
had this to say:
"As the movie rental chains have gone the way of the dodo bird,
there are two winners left standing-Netflix, which has emerged as
the go-to player in streaming content, and Coinstar, which has
become the bricks-and-mortar replacement thanks to its more than
28,000 Redbox DVD rental kiosks. The company has been cranking
out terrific growth for many quarters, and last week's
third-quarter report revealed more of the same-sales and earnings
up 43% and 74%, respectively, and cash flow improving
significantly. Importantly, the company also said it's nearing a
partnership to begin its own streaming service, but it's clear
that Redbox (which makes up 80% of revenue and which grew 54%
last quarter) is driving the bus right now. Impressively,
management gave superb guidance for 2011, including earnings of
$3 to $3.50 per share, and free cash flow of up to $200 million
(or about $6 per share). It's a big story."
Mike says the stock is a good buy in the low 60s and we think
this story has definitely got legs.
And for the latest buy, sell and hold advice from Mike, check out
his
Cabot Top Ten Weekly
, where you'll find the latest recommendations on DECK, CSTR and
other leading growth stocks.
---
In this week's Stock Market Analysis Video, Cabot Market Letter
Editor Mike Cintolo says that the market's uptrend continues, and
it's showing signs that its three-week correction is fading. Mike
touches on some market timing issues and discusses
Apple (
AAPL
), Priceline (
PCLN
), Fortinet (FTNT)
and
Globe Speciality Metals (GSM)
.
Click to watch the video.
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Until next time,
Elyse Andrews
Editor of Cabot Wealth Advisory