On Wednesday, Crocs Inc. (NASDAQ:CROX) shares saw its price target increased by Baird to $190 from $160, while maintaining an Outperform rating on the stock. The firm's analyst highlighted the company's recent first-quarter earnings call as a basis for the adjustment, noting the robust performance of the Crocs brand and overall margin results.
The Q1 financial results for Crocs were described as "mixed," with a significant revenue and earnings per share (EPS) outperformance. However, the company's annual guidance for its HEYDUDE brand was revised downwards due to a weaker performance in April.
Despite the lowered expectations for HEYDUDE, the analyst expressed confidence in the second half of the year, suggesting that the reduced projections could be conservative and potentially lead to positive surprises in the coming quarters.
Baird's analyst remains optimistic about Crocs' future, particularly in light of the company's plans for the latter half of the year. The firm believes that the current outlook for the second quarter and the full year 2024 EPS could see further positive revisions.
Additionally, a late-2024 inflection point for the HEYDUDE brand is anticipated, which could lead to a valuation increase, aligning Crocs' price-to-earnings ratio closer to its peers, which trade around 15 times or higher.
The report also noted the Crocs brand's strength and the company's margin performance as key factors contributing to the analyst's positive outlook.
While the adjustment in HEYDUDE's guidance was a point of disappointment, the lowered bar for the second half of the year is now seen as more achievable, providing room for upward revisions to the company's earnings estimates.
Overall, the analyst's stance on Crocs remains positive, with the new $190 price target reflecting a confidence in the company's earnings potential and brand strength. The target is based on a 12.5 times next twelve months plus one (NTM+1) price-to-earnings (P/E) ratio, with an expectation of a re-rating closer to the industry's higher P/E standards.
InvestingPro Insights
With Crocs Inc. (NASDAQ:CROX) capturing attention following Baird's upgraded price target, investors are keenly watching the company's metrics to gauge its investment potential. Notably, Crocs boasts a perfect Piotroski Score of 9, indicating strong financial health, and is trading at a low P/E ratio of 9.8 relative to its earnings growth, which could suggest an undervalued stock. These InvestingPro Tips align with Baird's positive outlook and support the idea of a potential re-rating closer to the industry's higher P/E standards.
The company's financials reinforce this perspective, with a robust Revenue Growth of 6.29% over the last twelve months as of Q1 2024, and an impressive Operating Income Margin of 25.82%. Moreover, Crocs has demonstrated a significant 30.85% return over the last three months, which may interest investors looking for strong recent performance. With the current Price / Book ratio standing at 5.19, some investors might perceive Crocs as carrying a premium; however, this could be justified by the company's revenue and profit margins.
For those seeking more in-depth analysis, InvestingPro offers additional insights, with a total of 12 InvestingPro Tips available for Crocs, which can be explored for a more comprehensive understanding of the company's financial health and market position. To gain access to these valuable insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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