Deckers Outdoor Corp. (NASDAQ: DECK) is trading higher on Monday after takeover chatter has been out in the stock. Our question is not really AT WHAT PRICE?… We want to know if a deal is really even possible here. The concerns here should be more than justified.

On Monday came a Bloomberg report that Deckers Outdoor is seen as luring buyers. The report cites Jefferies saying that the huge discount on the shares has made it more attractive of a candidate which is trading at just over 8-times earnings. Bloomberg pointed out that this was the cheapest valuation of any footwear and accessories. Then the report shows a Wedbush commentary followed by another with a magic $50 potential buyout price.

Our take has a different bend to it. Many shareholders were absolutely crushed chasing this trend of UGGs shoes and Teva sandals. The raw market cap of just over $1.2 billion in not an issue. What is an issue is that the gain of more than 5% to $34.85 still compares to a 52-week range of $28.53 to $109.98. Even if a buyout offer came at $50.00 per share, there are too many buried holders who are long and wrong here. Law suits would instantly surface with claims that Deckers is selling itself off for half the value of just a year ago due what may largely be a weather-sales related issue.

Deckers is cheap if you just consider that Thomson Reuters has consensus estimates of $3.36 EPS this year and $3.77 EPS next year. Even the revenue expectations of $1.43 billion in 2012 and $1.49 billion are cheap. There is a seasonality issue that exists here at this company, so it is without surprise that it has to trade at a discount to peers. Seeking Alpha has noted the possibility of a takeover before as well.

The long and short of the argument is that even if there is hope and value here, Deckers Outdoor would have to fetch far more than its current price today and far more than that $50 implied buyout price to keep shareholders from storming the corporate headquarters here.

JON C. OGG

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