Birkenstock (BIRK) had a strong week as shares barreled toward a cup-with-handle buy point. The stock has moved higher in recent months, leading up to a strong December-quarter earnings report.
The German maker of popular sandals and shoes saw strong year-over-year earnings growth, as shares extended a run up the right side of a cup base that featured a 64.78 buy point. But over the past few weeks, the stock has pulled back to form a handle, offering a lower buy point at 62.45.
↑ X NOW PLAYING Danger Ahead: This Sell Signal Tells You When To Get Out Of A Highflying StockThe good news is that the pattern is a first-stage base. During the stock's sell-off in late August, shares undercut the lows of the previous base, resetting the base count. Earlier-stage bases tend to have a higher probability of success than later-stage bases.
On the other hand, the base has a less-than-perfect silhouette after the August gap down created a dramatic drop in the first phase of the pattern.
The IBD Stock Checkup shows that Birkenstock boasts a strong 98 IBD Composite Rating, with a 97 EPS Rating. The stock also features a decently strong relative strength line, which has rebounded sharply since bottoming in mid-November. Ideally, the RS line will jump to new highs alongside or prior to the breakout.
In its most recent earnings report on Dec. 17, Birkenstock reported adjusted earnings of 32 cents per share on sales of $507.5 million. This represented year-over-year increases of 128% and 28%, respectively. The shoemaker now boasts two quarters of accelerating earnings growth, from 2% to 12% to 128%. Accelerating earnings growth is a strong indicator of stock market winners.
The firm pointed to "continued strong and growing consumer demand for its products across all segments, channels and categories" for its growth surge.
"As we continue to gain the attention of consumers and wholesale partners, we are seeing strong, balanced growth in both our DTC (direct to consumer) and B2B (business to business) channels," Chief Executive Oliver Reichert said in the news release. "Both of these channels are highly profitable and allow us to maximize our reach, especially into new targeted consumer groups."
According to IBD's MarketSurge, Wall Street sees Birkenstock generating a 39% year-over-year jump in earnings to $1.78 per share for 2025, with an increase of 27% in the next fiscal year.
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