We Like Skullcandy For Its Clean Balance Sheet And Newer Management, Says Roth Capital

In a research report issued today, Roth Capital analyst Dave King reiterated a Buy rating on Skullcandy Inc (NASDAQ:SKUL) with a price target of $10.00.

King commented: “We have increased visibility into Skullcandy’s normalized EPS potential of $0.90, helped by new relationships with Toshiba and Walmart that are on the cusp of delivering meaningful profitability. Today’s report quantifies the potential EPS benefit from each. We remain encouraged by Skullcandy’s many margin-accretive growth drivers and comfortable in our view that guidance and estimates are conservative. We like Skullcandy for its clean balance sheet and newer management’s renewed focus on brand.”

The analyst added, “We estimate potential “normalized” (~2017) EPS of $0.90, up meaningfully from the current runrate but still below the $1.00 in operating EPS the company booked in 2012. This assumes continued high-single-digit annualized revenue growth —with international growing to 50% of sales, gross margin holding in the mid-40% range, low-double-digit operating margins based on continued expense control and accelerating operating leverage, and a high-teens tax rate to reflect the increasing international contribution. We have increased visibility into this projection, given the potential for ~45%-50% accretion resulting from new relationships with Toshiba and Walmart.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Dave King has a total average return of 0.5% and a 40.0% success rate. King has a 7.5% average return when recommending SKUL, and is ranked #2170 out of 3293 analysts.

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