After being dragged through the mud in 2023, Dr Martens PLC (LSE:DOCS)’s fortunes could soon be on the rise, reckon analysts at Bank of America, who stated that "meaningful change is underway at the business”.
Dr Martens revised its 2024 adjusted earnings guidance downwards by more than 9% this week, primarily due to a more than 20% cut in the implied second-half earnings, largely attributed to increased caution regarding the US market.
Consequently, Bank of America has adjusted its price objective for Dr Martens to 135p from the previous 165p, reflecting lowered earnings expectations.
However, despite the recent disappointment, BofA emphasised that Dr Martens could be close to completing its cycle of earnings downgrades. This transition period could pave the way for a "cleaner equity story" moving forward.
In its analysis, BofA highlighted the challenges faced by Dr Martens in the US, including a prolonged recovery period driven by wholesale destocking and softer direct-to-consumer sales.
The report, however, identified some positive developments in recent trading across EMEA and Asia-Pacific.
“The brand isn’t broken,2 said analysts, and with earnings per share guidance significantly below its peers, the stock is “simply too cheap”.
Dr Martens remains a buy despite the share price downgrade.