Skechers stock could tank as much as 50% from here: short-seller warns

Skechers USA Inc (NYSE: SKX) is already down nearly 30% versus its year-to-date high but Spruce Point Capital Management warns the stock could continue to plunge moving forward.

Skechers stock could plummet to $18.60 a share

The footwear company is currently struggling with “excess inventory” that resulted in a 30% - 50% hit to its stock price, mostly recently in 2018 and before that in 2015. Based on this historical cue, therefore, the short-seller sees downside to $18.60 a share in Skechers.

The “investment opinion” dubbed China a major headwind as well. An estimated 25% annualised decline in second-quarter revenue from that market, Spruce Point noted, could also weigh on “SKX”.

The stock is trading at a trailing 12-month price-to-earnings multiple of 7.70, which Spruce Point suggests will contract further as growth continues to moderate.

Skechers should trade at a discount to peers

Skechers is a bit too weak to meaningfully rival the likes of Nike, Puma, and Adidas, the short-seller added. It, therefore, expects the NYSE-listed firm to trade at a discount to its industry peers.

Other reasons cited for the “strong sell” opinion include waning strength in Asia-Pacific on “limited brand appeal” and poor investor disclosure. The report reads:

Spruce Point expects the company’s free cash flow to remain below average as well. Skechers will likely report its Q2 financial results on July 26^th.