2023-04-24 09:16:23 ET
Earnings expectations for Crocs ( NASDAQ: CROX ) and Skechers ( NYSE: SKX ) could be unduly elevated ahead of results due later this week, according to Wedbush.
Equity analyst Tom Nikic explained that “while both companies seem to be doing fine fundamentally,” he is concerned that estimates have been revised upward too aggressively. Additionally, the jump of around 30% for each stock thus far in 2023 could prime the companies for a cool-down.
“We believe that investors expect beat-and-raises at both companies, which makes for a tough setup. Essentially, if they do beat-and-raise, it's difficult to imagine a meaningfully positive stock reaction (unless the magnitudes of the beat and the raise are exceptionally strong),” Nikic concluded. “But if there's any ‘squishiness’, these well-performing stocks could be due for a breather and could experience some near-term pressure.”
While he acknowledged that a beat and raise is not out of the question, even a strong result may not be able to spark another rally. As such, a long-term Buy rating remains appropriate, but caution is due in the near term, in Nikic’s estimation.
Read more on the earnings expectations for Skechers .
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Crox, Skechers estimates could be overly optimistic, Wedbush warns