Piper Sandler resumes coverage on Crocs shares with Overweight rating By Investing.com

Crocs Inc. (NASDAQ: NASDAQ:) received an optimistic outlook from Piper Sandler, which resumed coverage of the footwear company with an Overweight rating and a price target of $170.

The firm highlighted the stock’s rebound after the second-quarter earnings report but noted that it remains approximately 15% below its June peak, contrasting with a 3% rise in the S&P 500 index during the same period.

Piper Sandler emphasized Crocs’s attractive valuation, trading at 9-10 times price-to-earnings (P/E) based on the firm’s 2025 earnings per share (EPS) estimates, which are slightly below consensus.

The firm also pointed out that Crocs is trading at 8-9 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), which is lower than the 12 times average of its peers in the footwear and global brands sector.

The firm’s confidence in Crocs is bolstered by the brand’s performance, which exceeded industry growth by over 600 basis points in the first half of 2024, and the company’s leading profit margins.

Despite concerns around the HEYDUDE brand, Piper Sandler is encouraged by the recent hiring of Terence Reilly as the new Executive Vice President for the HEYDUDE Brand. Reilly’s previous experience with Crocs and his marketing expertise is expected to enhance brand awareness, which currently stands at 30%.

In other recent news, Crocs has made notable strides in the market, posting a historic second quarter with revenues exceeding $1.1 billion, the highest in the company’s history. The company’s adjusted earnings per share (EPS) rose by 12% to $4.01, achieving a record free cash flow. These financial results have been attributed to growth in brand awareness, market share gains, and product diversification.

In a significant development, Williams Capital upgraded Crocs stock from Hold to Buy, following the recent announcement that Sidney Sweeney, actress, and producer, has become the new face of HEYDUDE, a Crocs brand. The firm anticipates this partnership to attract younger consumers and enhance the brand’s visibility, positively impacting the brand’s performance through at least 2025.

Despite a revenue decrease for the HEYDUDE brand, Crocs brand revenues grew by 11%. The company also reported growth in both North American and international markets, specifically noting significant growth in China and Australia. In light of these recent developments, the company plans to optimize the SKU count and expand into new markets, while maintaining a cautious outlook on consumer spending and geopolitical impact.

InvestingPro Insights

With a current market capitalization of $8.44 billion, Crocs Inc. (NASDAQ:CROX) is positioning itself as a competitive player in the footwear industry. The company’s stock price has been subject to volatility, yet it’s trading at a relatively low P/E ratio of 10.63, which is attractive when paired with its near-term earnings growth. The P/E ratio has slightly adjusted downward in the last twelve months as of Q2 2024 to 10.04, indicating a potential undervaluation compared to earnings.

The brand’s robust financial health is underscored by its gross profit margin of 57.11% and an operating income margin of 26.36%, reflecting efficient operations and strong profitability. Additionally, Crocs’s liquid assets surpass its short-term obligations, which is a reassuring sign of financial stability for investors.

InvestingPro Tips suggest that while analysts have revised their earnings estimates downwards for the upcoming period, the company remains profitable with a solid track record over the last decade. These factors, combined with a high Price / Book multiple of 5.1, may require careful consideration for potential investors. For those looking to delve deeper into Crocs’s financial health and future prospects, there are 11 additional InvestingPro Tips available at https://www.investing.com/pro/CROX.

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