Deckers Outdoor Corp (DECK), a prominent player in the retail stock market, has exhibited remarkable performance in 2024, boasting an impressive 87.4% year-to-date gain. This upward trajectory continued recently with the stock achieving a new all-time high of $214.70 on December 20th, and it remains on track for its fourth positive session out of the last five. The stock’s momentum has been consistently supported by the 20-day moving average, which has acted as a reliable buffer during several pullbacks since early November, further solidifying its bullish outlook. Adding to the optimistic sentiment is a historically bullish signal triggered by the confluence of Deckers’ record high and unusually low implied volatility, hinting at the potential for further upside.
This bullish signal revolves around the relationship between Deckers’ stock price and its implied volatility (IV), a measure of the market’s expectation of future price fluctuations. Specifically, the stock’s recent all-time high has coincided with significantly depressed IV levels, a combination that has historically foreshadowed positive price movements. Quantifying this relationship, data analysis reveals that over the past five years, there have been five instances where Deckers stock traded within 2% of its 52-week high while its Schaeffer’s Volatility Index (SVI), a proprietary measure of implied volatility, resided in the bottom 20th percentile of its annual range. Currently, DECK’s SVI stands at 27%, placing it in the 14th annual percentile, thus replicating this historically bullish setup.
Historical data further substantiates the significance of this signal, demonstrating that one month after such occurrences, Deckers stock has risen 80% of the time, achieving an average gain of 5.7%. Applying this historical average to the stock’s current price of $208.70 suggests a potential target of $220.59, which would represent a new all-time high. This reinforces the bullish outlook and suggests that the stock’s upward momentum is likely to persist.
Despite the overwhelmingly positive technical indicators and historical trends, the sentiment among analysts covering Deckers remains cautiously optimistic. A significant portion of analysts, nine out of the total covering the stock, maintain a “hold” rating, reflecting a degree of reservation. Furthermore, the consensus 12-month price target of $202.15 represents a 3% discount to the current market price, suggesting that analysts, on average, do not anticipate significant further upside. This divergence between the technical picture and analyst sentiment presents an intriguing dynamic for potential investors.
Adding further credence to the bullish outlook is Deckers’ strong Schaeffer’s Volatility Scorecard (SVS) rating of 95 out of 100. This metric indicates that DECK has consistently outperformed volatility expectations over the past 12 months. In essence, the stock has delivered stronger returns than its implied volatility would suggest, demonstrating its resilience and potential for further gains. This consistent outperformance adds another layer of confidence to the bullish narrative surrounding Deckers.
In conclusion, Deckers Outdoor Corp presents a compelling investment case based on a confluence of positive factors. Its strong year-to-date performance, recent all-time high, and consistent support from the 20-day moving average all contribute to a bullish technical picture. The historically bullish signal generated by the combination of record high prices and low implied volatility further bolsters this outlook, with historical data suggesting a potential for further upside. While analyst sentiment remains somewhat reserved, the stock’s impressive SVS rating underscores its ability to outperform volatility expectations, adding to the overall positive narrative. However, investors should always conduct thorough due diligence and consider their individual risk tolerance before making investment decisions.
