This under-the-radar retail stock has delivered triple-digit returns over the last year and traders say it’s not done rising yet. Here’s the buy level to watch for now.
Crocs (NASDAQ: CROX) had a great Thursday.
The stock surged nearly 10% after Crocs said revenues grew 93% in the second quarter, and raised its guidance for the full year.
The shoemaker handily delivered top and bottom line beats on Thursday, posting adjusted earnings per share of $2.23 on revenue of $640.8 million. Analysts had expected earnings per share of $1.60 on revenue of $565.2 million. The company also said it now expects to see revenue growth of between 60% and 65% year-over-year in 2021.
“We continue to see strong consumer demand for the Crocs brand globally. On the back of record second quarter results and continued momentum, we are raising our full year 2021 guidance,” Crocs CEO Andrew Rees said in the earnings release. “We are also committing to net zero emissions by 2030, enabling us to provide ‘comfort without carbon’ to our customers worldwide. I believe we can deliver sustained, highly profitable growth while having a positive impact on our planet and our communities.”
On top of Thursday’s gain in the stock, Crocs shares have risen more than 266% over the last twelve months, adding 114% so far this year alone. And traders say the stock has more room to run.
“Who knew they had such an incredible trajectory?” said Lido Advisors chief market strategist Gina Sanchez. “And they are so cheap relative to other retailers, particularly footwear. They’re trading at 20 times forward PE, 22 times trailing which is to say that they’re expecting great growth, and that growth is not yet priced into the stock.”
“The children’s market is always interesting because it’s sort of a naturally regenerative market when you’re constantly buying,” Sanchez added. “The fact is, they have expanded their whole retail line across the adult market as well. This is interestingly a stock you shouldn’t underestimate.”
Crocs’ clogs became a hot commodity amid the pandemic as shoppers sought comfortable footwear. The surge in popularity of the brand came as the its clogs became the ideal work-from-home shoe, were seen on celebrities like Justin Bieber and Questlove, and as Crocs collaborated with celebrities and designers on limited editions. One such limited edition, a collaboration with rapper Bad Bunny, sold out within just 16 minutes.
“Crocs is increasing its focus on direct-to-consumer and ramping up its digital presence,” said Katie Abel, executive editor of Fairchild Media Group’s Footwear News. “At the same time, it is decreasing its reliance on wholesale and cutting ties with longtime retail partners. That’s leaving some stores scrambling to figure out how to replace such a hot brand, and it’s likely that some may be looking to competitors and copycats to fill the gap.”
Blue Line Capital Partners’ Bill Baruch said he regrets not buying the stock when it fell to its pandemic low in March 2020. Since that low, the stock has risen 1,125%.
“The company has done everything right,” Baruch said. “Everything from celebrity sponsors, they’ve done a great e-commerce pivot during the pandemic and another great earnings report here with accelerating growth. I do think that there is a place to buy here.”
Looking at the Crocs’ chart, Baruch noted that the stock looks due for a pullback, which would be an excellent buying opportunity.
Baruch said he’s eyeing a pullback to around $120, or around the stock’s latest support level from the latest breakout. He also said that if the stock fell to around $92, that would be a major buy signal.
“If you break below $120 though, we could shop around a bit between $110 and $120,” Baruch concluded.
