Сrocs (CROX) stock forecast: the undervalued leader of the slippers
16:13, 24 September 2021
The price of Crocs shares has exploded so far this year, accumulating a 148.5% year-to-date gain. Over the same period, broad-market indices like the Dow Jones Industrial Average (DJIA) and the S&P 500 have advanced 12% and 17%, respectively.
This eye-popping performance comes on top of the 49.6% advance reported by CROX last year as demand for its branded slippers accelerated during the pandemic.
Data from industry sources like BizVibe indicates that Crocs is the world’s foremost slippers brand, and the company’s robust e-commerce channel helped it navigate the troubled waters of the virus crisis.
During this complex period, users relied on digital platforms to buy whatever they needed to feel more comfortable while confined within their homes – including slippers.
Moreover, only a few days ago, the company hosted its Investor Day event. The management set forth very ambitious goals that made things clear for market participants in regards to what can be expected from Crocs in the next few years.
Can the share price keep growing? Or is the company poised to reverse its uptrend amid a potentially fading pandemic tailwind? In the following article, we analyse the Crocs stock outlook by assessing both the price action and fundamentals of this global slippers manufacturer.
Crocs stock news
The price of Crocs Inc. stock rose 8.5% on the day the company released its Investor Day presentation. Market participants were buoyed by the forecasts set forth by the management for the 2026 fiscal year.
The Crocs management team expects to push its sales to $5bn by the end of 2026, resulting in a 17% compounded annual growth rate (CAGR), compared to its estimated top-line figure of $2.25bn for this 2021 fiscal year.
The company expects to focus on four different growth opportunities to accomplish this goal. These are:
Growing the scope and reach of its digital channels (aiming for 50% of total revenues by 2026)
Diversifying into sandals ($30bn total addressable market).
Increasing its presence in the Asian region (aiming for 25% of total revenues by 2026. China is the #2 footwear market by demand).
Investing more in innovative product development and marketing efforts (introduce customisation, ramp up brand awareness, etc.)
From a financial standpoint, the management is expecting to deliver a 26% adjusted operating margin by 2026, along with producing total free cash flows of over $1bn.
The Crocs management provided an additional $500m for share repurchases to be executed during the fourth quarter of 2021, on top of the $500m already deployed.
The price of Crocs stock has been on a relentless uptrend since the February-March pandemic-induced crash. Even though there have been some hiccups along the way, the trend remains intact.
The company’s latest announcements have resulted in a break of the $148 resistance, as shown in the Crocs stock chart above. This level has acted as support in the past few sessions during the Evergrande-related broad-market weakness.
Trading volumes for Crocs were quite high on the day when the presentation was released, remaining above the 10-day average for at least three more sessions.
Momentum indicators point to a bullish outlook for CROX, although the Relative Strength Index (RSI) has not made a higher high, despite the price climbing to all-time highs. On the other hand, the Moving Average Convergence Divergence (MACD) has just crossed above the signal line, a move accompanied by positive histogram readings.
Moving forward, a Fibonacci-based Crocs stock prediction would see the price rising to around $173 a share, resulting in a 9% upside potential, as long as the uptrend continues.
This forecast is drafted upon performing a thorough technical analysis of the Crocs price action. It should not be taken as a recommendation to invest in Crocs stock. Actual results can vary widely, depending on the evolution of many factors.
Crocs fundamental analysis
Crocs sales had been relatively stalled until 2019, when the company saw its top-line results increase by 13%. Sales grew 12.6% in 2020 as the pandemic prompted the company to strengthen its online presence.
The management’s guidance of $2.25bn for this year would result in a significant acceleration in Crocs top-line growth, as its year-on-year growth rate will jump to 61%.
Crocs operating margins have been steadily increasing from negative 0.24% back in 2016 to 18% last year and 27% in the past twelve months. This shows that most of the upside experienced by CROX stock has been the result of a material improvement in the company’s bottom-line performance.
The company’s net margins have also been improving, as they have moved from minus 1.6% in 2016 to 22.6% last year and 35.4% in the past twelve months. Ever since the company swung to profitability back in 2017, its normalised diluted earnings per share have grown from $0.20 to $2.21 a share at a 122.7% CAGR.
At its current price of $160 a share, Crocs is valued at only 21.3 times its forecasted earnings for the next twelve months, according to data from Koyfin. If the management lives up to its promise of producing $1bn in free cash flows by 2026, the stock’s forward price to free cash flow (P/FCF) ratio would stand at 10, based on Crocs’ current market capitalisation of $10bn (as of 24 September 2021).
The company has relatively small long-term debt of $386m (not including leases) on total assets of $1.49bn that include $198m in cash and equivalents.
From both a historical and forward-looking perspective, Crocs seems to be heavily undervalued, based on how its business has been performing lately and the future goals outlined by the management team.
Additionally, Crocs market share in the slippers segment makes its brand a valuable intangible asset that may easily justify a large portion of the current valuation.
Moving forward, the outlook for Crocs from a fundamental perspective is bullish as long as the management maintains the company’s latest positive bottom-line performance and even more so if it reaches these ambitious objectives.
This opinion is drafted upon performing a thorough analysis of Crocs fundamentals. It should not be considered a recommendation to invest in Crocs. Investors should perform their own due diligence to make an informed decision about whether to buy or sell this stock.
Сrocs (CROX) stock forecast: analysts ratings and targets
Is the Crocs stock buy or sell? The first target for Crocs was outlined above, based on an assessment of the latest price action. This target of $173 would result in an upside potential of 9%, as long as the uptrend continues.
Data from TipRanks shows that the average price target from analysts stands at $179.67 a share, resulting in a 12.7% upside compared to today’s price of $159.5 a share (24 September). Currently, the stock is rated a moderate buy – 7 out of 10 analysts rate CROX a buy. No analyst rates the stock a sell.
The highest 12-month forecast at the moment is $215 a share. The lowest is $151 a share.
Finally, an algorithm-based CROX stock forecast for 2025 (as of 24 September 2021 ) from Wallet Investor expects to see the price rising to around $276 and $278, resulting in an attractive 14.9% CAGR.
These forecasts are drafted based on an analysis of Crocs historical stock price trend and past performance never guarantee future results. We encourage our traders to perform their own due diligence before making any trading decision.
Edited by Alexandra Pankratyeva
FAQs
Is Crocs a good investment?
Crocs meets most of the conditions to qualify as a top value pick including the following:
Strong brand (big moat)
Steadily increasing bottom-line profit margins
Multiple growth opportunities
Conservative valuation
Manageable long-term debt
You should note that past performance does not guarantee future returns. Conduct your own thorough technical and interactive Crocs stock analysis to decide whether it can bring you some profitable trading opportunities.
Why is Crocs stock going up?
The price of Crocs went up 8.5% on 14 September following the release of an Investor Day presentation that outlined multiple ambitious goals for the business for 2026.
Will Crocs stock go up?
lthough it’s impossible to predict accurately if a stock will go up, algorithm-based predictions from Wallet Investor and Tip Ranks point to a surge in Crocs stock, based on an analysis of its current trend. Bear in mind that any stock predictions can go wrong and make sure you made your own due diligence before making any trading decision.
How to buy Crocs stock?
Crocs stock can be bought via contracts for difference (CFDs) through Capital.com’s trading platform. You can take either a long or short position on the instrument based on your own directional forecast.
As a leveraged product, CFDs are designed to maximise gains. However, you should be aware of the high risk involved because CFD trading also magnifies losses should the stock’s price move against your position.
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