Shares of Birkenstock Holdings plc (NYSE: BIRK) made a decent recovery after falling more than 10% from its closing price of $50 on January 17, 2024. The reason for the stock's decline was the results of Birkenstock's initial earnings report. The company posted mixed earnings, with revenue beating expectations but earnings per share (EPS) coming in three cents below the company's forecast. 

The more disappointing aspect is expectations for lower earnings for the rest of the year. Birkenstock is now forecasting lower earnings due to margin pressures. Is this creating a buying opportunity for BIRK stock? Without much history for investors to go on, the stock contains some risk, but let's look at both sides of the argument. 

Margin contraction may be overstated 

Birkenstock is now forecasting margins of 30%. The concern is that number is down from approximately 32% in 2023, which was down from 35% in 2022. Like many retailers, Birkenstock is not immune from the effects of inflation on its material costs. However, the company has been able to pass along some of those costs and continues to post revenue growth of over 20%.  

It's also important to understand why Birkenstock lowered its earnings forecast. The company is planning to open over 20 retail stores globally in 2024.  

The sandals aren't the only thing that's expensive about Birkenstock 

Birkenstock owners attest to the elevated quality, comfort, and, yes, the price of the company's signature sandals. However, like its sandals, BIRK stock is also expensive. And not just as it relates to the S&P 500 Index. Birkenstock trades for around 39x forward earnings, which is significantly higher than that of most retail stocks. 

However, if you consider a pair of Birkenstock's to be a luxury item on par with, for example, Lulelemon Atheltica Inc. (NASDAQ: LULU), the P/E ratio looks more appealing. Of course, you have to ask if you believe the company will hit its forecast for 17% to 18% revenue growth in 2024.  

Where is the buy zone for BIRK stock?  

After dropping to nearly $43 a share on Friday, January 19, buyers came in to partially save the week. BIRK stock closed at $46.32. That puts the stock near a level of support that's been in place since mid-December.  

From a technical standpoint, it might be tempting to say that Birkenstock is in a buy zone. Be careful. Birkenstock has only been trading publicly since October 2023. It doesn't even have a 200-day moving average established.  

Nevertheless, the early read from analysts is bullish. The Birkenstock Holdings analyst ratings on Marketbeat show that Piper Sandler and Robert Baird have reiterated their Overweight and Outperform ratings, respectively, on BIRK stock. Both analysts also give BIRK stock a price target of over $54 per share, which is about 15% higher than the current consensus estimate.