Comment: Birkenstock IPO a good gauge of sentiment for consumer-sensitive stocks

Comment: Birkenstock IPO will be a good gauge of sentiment for consumer-sensitive stocks – says Kyle Rodda

 
“Will the hipsters buy the stock of Birkenstock? If they don’t, the investment community certainly seems to want “in” on the brand loved by so many boujie 30-something-year-olds. The company is looking poised for a fully subscribed IPO – the fourth on Wall Street in the space of roughly a month.

It puts the company’s valuation around the top end of the $44 – $49 target range, or $10 billion. Arguably, that’s pretty rich. Based on the company’s latest revenue release, the stock’s price-to-sales ratio is above 6, which is at the higher end of comparable consumer discretionary companies on Wall Street. In a higher interest rate environment, these multiples may be hard to sustain in the short term, especially if consumer spending slows as expected next year as interest rate hikes bite households.

Recent companies to IPO have seen their stocks surge on the day of listing, although the moves have proven short-lived. The Birkenstock IPO will be a good measure of broader market sentiment and sentiment toward consumer-sensitive stocks. It might tell us, too, whether cashed-up millennials like to buy the stocks of products they commonly find on the bottom shelf of their wardrobes.”
 
Kyle Rodda is Senior Market Analyst at Capital.com