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Bull Of The Day: Crocs (CROX)

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Crocs (CROX - Free Report) are back. As much as everyone loves and hates the trend, it can’t be stopped. CROX is up over 200% in the last 2 years as investors flock back into this former dud. This shoe is back on the feet of teenage pool zealots, driving the company’s topline to the all-time highs that analysts are estimating for 2019.

CROX has beaten both top and bottom-line estimates for the past 10 consecutive quarters. Analysts continue to be impressed and have guided their estimates up, pushing this stock into a Zacks Rank #1 (Strong Buy).

The Business

Crocs began in 2002 with its iconic clog design, a style that has been branded into the childhood memories of every millennial. The early 2000s fad drove this stock to its peak of $74.75 on Halloween day, 2007. Today CROX sits at less than half of that, trading at $28.80 a share.

The firms seemed to be making an effective pivot in the e-commerce driven ‘retail apocalypse’. Crocs has been strategically closing down its brick-and-mortar location to focus on its low overhead, high growth e-com business. In 2018 online sales made up roughly 17% of total sales (e-com sales up over 20% from the prior year) and is expected to continue to grow as a primary revenue driver.

Valuation and Price

CROX forward P/S has been trending up over the last 2 years because of the growth that is being priced back into the stock. Over the same time frame, the stock’s PEG has dropped a substantial amount as the company gets deeper into profitability. Valuations are in line with the industry average.

CROX has been quite volatile this year, from its high of $31.88 in January the stock fell 45% to its low of $17.53 in June. Today the stock is up 64% from its low, trading close to its 52-week high at around $29.00.

This stock has driven up almost 30% since the beginning of September. A rally that quickly is likely going to be followed by a slight pullback. I would wait for a marginal retracement back to its 200-day and 50-day moving average of $24-$26 to get into this. There appears to be a level around the $24-$25 price point that CROX shares keep bouncing off.

Take Away

The Croc is cool again, propelling a Gen Z fashion statement into a fashionable trend. The brand is etching its name into the childhood memories of another generation.

Crocs has crawled its way out of the pond and back into growth. With 100s of products to choose from, this brand now caters to all consumers. Crocs low cost, comfort, and simplistic style have driven this shoe back into the teen trend spotlight.

The fact that Crocs are still relevant today proves that it is more than a fad, and I expect that we will be seeing much more these affordable and comfortable shoes around town.

 

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