"Despite FX headwinds, RadioShack's (RSHCQ) bankruptcy and West Coast port issues, Skullcandy's business is healthy across channel inventories, product lineup and traction, and market share," Jefferies analysts said, adding that Skullcandy is operating from a point of strength, and that they would aggressively buy shares at these levels.
Analysts said that revenues and the customer base are now reset toward a more normalized level and sales growth is gaining meaningful momentum, following the company's aggressive cleanup of its distribution and implementation of a more focused product strategy.
Jefferies increased its 2015 fiscal year earnings estimates to 42 cents per share from 40 cents per share, and Skullcandy is expected to post total sales of $157 million in 2015, up from $137 million in 2014.
"Skullcandy remains significantly under penetrated in international markets and has room to grow through its new Walmart (WMT) partnership," analyst said, adding that continued investment in demand creation and innovation should drive incremental top line and market share gains.
Separately, TheStreet Ratings team rates SKULLCANDY INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate SKULLCANDY INC (SKUL) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 0.1%. Since the same quarter one year prior, revenues rose by 16.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- SKUL has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, SKUL has a quick ratio of 1.61, which demonstrates the ability of the company to cover short-term liquidity needs.
- Powered by its strong earnings growth of 75.00% and other important driving factors, this stock has surged by 27.26% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- Net operating cash flow has significantly decreased to -$1.77 million or 126.59% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Household Durables industry and the overall market, SKULLCANDY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: SKUL Ratings Report