CROX - Crocs stock price is firing on all cylinders: 18% jump is likely
2024-05-30 11:05:45 ET
Crocs (NASDAQ: CROX) stock price is firing on all cylinders as the market reflects on its growing revenues, profits, and market share. It has soared by over 67% this year, outperforming the Nasdaq 100 and S&P 500 indices. Also, it has beaten the SPDR S&P Retail ETF, which is up by over 4% this year.
Strong revenue and profitability growth
Crocs has been doing well since the pandemic, when its sales and popularity surged in the United States and other countries.
Data shows that the company’s revenue soared from $1.23 billion in 2018 to over $3.9 billion. Wall Street expects that its annual revenue will soar to $4.14 billion this year and $4.37 billion in 2025 as its growth accelerates.
Crocs has been growing both its top and bottomline. Its annual profit has jumped from over $119 million in 2018 to over $540 million in 2023.
The most recent financials revealed that its revenue rose to a record $939 million, helped by its eponymous brand. This growth is also being driven by its international business, which expanded by over 21% in the last quarter. Most importantly, Crocs has slashed its inventories from over $476 million to about $392 million.
Still, there are some challenges in the company. The biggest one is its HEYDUDE brand, which started well but has lost momentum. As a result, the management expects that its sales will tumble by double-digits in the second quarter.
The other challenge is that its North American business is showing signs of slowing down. In its recent results, the company said that its revenue will grow by between 1% and 3%, which is lower than what it did a few years ago.
Additionally, the company has substantial debt. It ended the quarter with $1.7 billion, down from $2.2 billion in the same period a year earlier. This is substantial debt considering that it has $159 billion in cash.
On the positive side, there are signs that the stock is still undervalued. Data compiled by SeekingAlpha shows that it has a GAAP price-to-earnings ratio of 11.90, lower than the industry median of 17.7.
Its forward enterprise value (EV)-to-EBITDA is 10.06, slightly higher than the industry average of 9.7. Crocs also has some of the best profitability margins in the industry. It has a gross profit margin of 56%, higher than the industry’s median of 37 and a net income margin of 19.80%. The management has committed to continuing growing its margins.
Crocs stock price forecast
The daily chart reveals that the CROX share price has been in a strong bull run in the past few months. In this period, it has crossed the crucial resistance point at $151.45, the upper side of the cup and handle pattern.
Crocs shares have also soared above the 50-day and 100-day Exponential Moving Averages (EMA). The Average Directional Index (ADX) has soared to over 35, signalling that the trend is strengthening.
Therefore, the short-term outlook for the stock is bullish, with the next point to watch being the psychological level of $183, its all-time high. This target implies a 18% upside from the current level. In the long term, however, I take Crocs growth with a grain of salt because there are signs that its revenue growth is slowing.
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