Skechers (SKX) is an athletic shoe and accessories manufacturer and retailer; it designs and distributes performance footwear for men and women, explains John Staszak, an analyst with independent Wall Street research firm, Argus Research.

Skechers supply chain initiatives and strong brand are likely to boost revenue and earnings over the next two years. In 2022, we project revenue of $7.3 billion, a 16% increase and a record for the company, followed by a 10% increase to more than $8.0 billion in 2023.

In 2022, we expect earnings to benefit from share buybacks, and we are raising our earnings estimate to $3.00 per share from $2.95 per share. For 2023, we are increasing our estimate to $3.75 per share from $3.70 per share. Both our estimates are above consensus. Our long-term earnings growth rate forecast is 12%.

Our raised estimates reflect new products and wider margins driven by higher selling prices, as well as sales growth in its e-commerce, retail and wholesale channels.

Skechers’ swift product launches enable it to respond quickly to evolving fashion trends and sustain margins. As COVID cases ease, we expect the company’s comfort technology to grow more popular with consumers, resulting in another year of record revenue.

Our five-year rating remains "buy" based on our view that Skechers will continue to develop innovative products and expand over time through new store openings and international distribution agreements. We also expect it to benefit from rapid growth in emerging markets, especially China and India.

SKX shares are trading at 12.3-times our revised 2022 EPS estimate, below the five-year average of 16.8. We believe that this valuation inadequately reflects the company’s strong brand, prospects for record revenue and efforts to improve its supply chain.

As such, we are upgrading the shares to "buy" from "hold" with a price target of $44. Our target price, if achieved, offers investors the prospect of a 19% return.

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