On Wednesday, Stifel, a financial services firm, adjusted its price target for Crocs (NASDAQ:CROX), a global footwear company, reducing it from $158.00 to $138.00. Despite the reduction, Stifel continues to endorse the stock with a Buy rating.
The revision follows Crocs' third-quarter financial performance, which saw a $16 million increase in revenue and a $0.52 rise in adjusted earnings per share (EPS), attributed to an earlier-than-expected fulfillment of wholesale orders. However, the company's guidance for fourth-quarter revenue and adjusted EPS is significantly lower than Stifel's and other analysts' previous forecasts.
Stifel noted the slower-than-anticipated progress in revitalizing the HEYDUDE brand, a subsidiary of Crocs. The firm is optimistic about the new strategic direction focused on brand marketing, including a partnership with actress Sydney Sweeney, which is expected to help stabilize revenue by the second half of 2025.
Despite Crocs' confidence in its growth strategy and plans to continue investing through 2025, Stifel projects that this will lead to a contraction in consolidated EBIT (earnings before interest and taxes) margin compared to the anticipated 25% or more in 2024. Earnings are estimated to remain flat year-over-year in 2025, deviating from the company's long-term goal of low double-digit annual EPS growth.
Stifel justifies its continued Buy rating by highlighting the undervalued nature of Crocs' shares, considering the brand's international growth potential, a low double-digit free cash flow (FCF) yield, and any positive developments from the HEYDUDE brand. The new price target of $138 reflects an 8.5 times enterprise value to EBITDA (EV/EBITDA) multiple based on calendar year 2025 estimates.
In other recent news, Crocs Inc. has experienced noteworthy developments. The company's third-quarter results exceeded expectations, with significant growth in sales, operating margins, and earnings per share. However, Crocs has adjusted its forecast for the rest of the fiscal year 2024, with fourth-quarter projections set lower than anticipated.
Barclays and Williams Trading have revised their price targets for Crocs to $125 and $140 respectively, while maintaining positive ratings on the stock. Barclays' adjustment reflects the challenging macroeconomic environment and the slower-than-expected integration of HEYDUDE, a brand acquired by Crocs. Williams Trading, on the other hand, cited a mix of factors including a 7.5% increase in revenue for the third quarter of 2024, and a significant 17.4% decline in HEYDUDE sales.
In an innovative move, Crocs has partnered with BARK to launch a pet-friendly footwear line, Pet Crocs, tapping into the growing pet accessory market. This new product line includes matching shoes for dogs and their owners.
Analysts have been active in their evaluations of Crocs. Williams Trading has raised the revenue forecast for fiscal year 2024 from 8% to 9%, while Baird reaffirmed its Outperform rating, suggesting a promising outlook for Crocs' third-quarter earnings. Guggenheim initiated coverage on Crocs with a Buy rating, highlighting the brand's resilience and underappreciated free cash flow.
InvestingPro Insights
Recent InvestingPro data provides additional context to Stifel's analysis of Crocs (NASDAQ:CROX). Despite the reduced price target, Crocs' financials show some positive indicators. The company's P/E ratio of 10.01 and adjusted P/E ratio of 7.77 for the last twelve months as of Q2 2024 suggest that the stock may be undervalued, aligning with Stifel's view on the company's potential.
InvestingPro Tips highlight that Crocs is "Trading at a low P/E ratio relative to near-term earnings growth" and "Trading at a low earnings multiple," which supports Stifel's stance on the stock's undervaluation. Additionally, the company's strong financial performance is evident in its "High return over the last decade" and being "Profitable over the last twelve months."
However, investors should note that the "Stock has taken a big hit over the last week" and has "fared poorly over the last month," with a 1-month price total return of -22.95%. This recent volatility may reflect the market's reaction to the lower-than-expected guidance mentioned in Stifel's report.
For those interested in a deeper dive into Crocs' financial health and market position, InvestingPro offers 13 additional tips, providing a comprehensive view of the company's prospects.
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