The 250-year-old German sandal maker publicly listed on 11 October 2023 and on its first day, shares opened 11% beneath its preliminary value, in accordance with information from Morningstar Direct.
The corporate priced its shares at $46 at IPO, the midpoint of the indicated vary of $44 and $49, however had slumped to lower than $41 on the finish of buying and selling. The corporate had anticipated to lift roughly $1.5bn from the itemizing.
“They are saying timing is every part with regards to IPOs and we are able to safely say Birkenstocks timing was off, given the sharp sell-off in October,” mentioned Michael Hewson, chief market analyst at CMC Markets UK.
Russ Mould, funding director at AJ Bell, argued there are additionally company-specific points which have impacted its weak efficiency, reminiscent of a valuation that “doesn’t instantly look low-cost”.
“The inventory trades on round 5 occasions gross sales for 2023 and even when earnings take off as analysts anticipate there isn’t a certainty, provided that recession worries lurk, regardless of all of markets’ present religion in a smooth touchdown (at worst),” he mentioned.
“A a number of of 25 occasions 2025 earnings hardly leaps off the web page as a discount, even permitting for the facility of the model and the 20%-plus working margins that the corporate makes.”
Nonetheless, the corporate’s IPO was the third largest within the US market this 12 months, and it carried out higher than different listings, reminiscent of Instacart and Klaviyo. Furthermore, its shares have barely rebounded since its float, up 5% during the last month, in accordance with information from Morningstar Direct.
Past the underwhelming response to one of many only a few Wall Avenue listings this 12 months, the shoe maker stays worthwhile, with whole 2022 income of $1.35bn and internet earnings of $202.8m.
When the accounts had been launched previous to the IPO, the revenues for the 9 months to June had been estimated to be $1.2bn, surpassing the full income from the earlier 12 months.
The cash raised by the IPO has additionally allowed the corporate to repay $550m in loans, lowering its whole debt to €1.31bn.
Ismail Rashid, equities analyst at Charles Stanley, mentioned Birkenstock’s funding case is supported by a “sturdy model heritage” and a vertically built-in enterprise mannequin, which he mentioned offers it “business main margins”.
“It has a protracted runway of development because it seems to be to focus on new under-penetrated rising markets,” he added.
AJ Bell’s Mould added the corporate has a model with pricing energy, which may imply strong margins, good money circulate and a “respectable stream” of dividends over time.
“Pricing energy may be notably invaluable at a time of inflation, because it helps the agency defend these margins and that cashflow, because of buyer loyalty,” he mentioned.
Hargreaves Lansdown head of cash and markets Susannah Streeter mentioned that though the model’s recognition might present some resilience, there may be warning amongst buyers surrounding Birkenstock’s future revenue development, given price pressures.
“With cost-of-living pressures nonetheless swirling, and the Federal Reserve nonetheless showing intent on holding rates of interest at ‘restrictive’ ranges to decrease inflation additional, there may also be concern that buyers might need much less cash to spend,” she mentioned.
Streeter famous that given retail gross sales are slowing within the US in mild of the Fed’s fee hikes, potential rate of interest cuts ought to assist give extra help to shopper discretionary shares.
AJ Bell’s Mould famous the corporate has additionally made a number of strategic strikes designed to spice up development, notably funding in its on-line providing, taking again distribution from third events and enlargement of its retail property.
Charles Stanley’s Rashid mentioned Birkenstock’s fast enlargement opens the corporate as much as execution dangers. Furthermore, he famous that its premium valuation relative to its peer group raises the stress for the model to ship in opposition to this “excessive expectation”.
“The corporate has not reported quarterly numbers so we’ll discover out when earnings studies – over time – are in comparison with earnings expectations,” added Mould.