On Wednesday, Baird, a financial services company, adjusted its price target on Crocs Inc (NASDAQ:CROX), a global footwear company, to $180 from the previous $190. The firm maintained its Outperform rating on the stock despite the reduction. The revision follows Crocs' third-quarter performance, which, while solid, did not exceed expectations as past quarters have.
The analyst from Baird noted that although Crocs raised its 2024 earnings per share (EPS) guidance, there are concerns due to a more challenging spending environment and a prolonged recovery for the HEYDUDE brand, which Crocs acquired. These factors are believed to be affecting investor confidence. In response to these challenges, Baird has decided to keep its 2024 EPS estimates unchanged but has reduced its 2025 EPS forecast, now incorporating an expected decline in EBIT margin.
Despite the reduction in the price target, Baird sees a compelling value in Crocs shares, especially after the stock's recent pullback. The firm's assessment suggests that at 8.5 times the next twelve months' (NTM) price-to-earnings (P/E) ratio, the risk-reward profile for investors is attractive. The analyst expressed a belief that Crocs' ongoing investments could lead to improved top-line growth, which is considered crucial for a potential re-rating of the stock.
In conclusion, Baird's stance remains positive on Crocs' future, with the firm emphasizing the potential for the company's strategic investments to drive growth and enhance shareholder value, despite the near-term headwinds and market concerns.
In other recent news, Crocs reported a stronger-than-expected third-quarter performance with revenues of $1.06 billion, a 2% year-over-year increase, surpassing the consensus estimate of $1.05 billion. Adjusted earnings per share (EPS) was $3.60, exceeding the consensus of $3.10. However, the company's subsidiary, HEYDUDE, saw a 17% decline in sales, causing a significant reduction in the guidance for the brand.
Financial services firms have adjusted their outlook on Crocs. BNP Paribas (OTC:BNPQY) Exane maintained a Neutral rating with a steady price target of $128.00. Stifel reduced its price target from $158.00 to $138.00 but maintained a Buy rating on the stock. Similarly, Barclays lowered its price target to $125 from $164, while still maintaining an Overweight rating. Williams Trading also adjusted its price target from $163.00 to $140.00, maintaining a Buy rating.
Crocs has also partnered with BARK to launch a pet-friendly footwear line, Pet Crocs, capitalizing on the growing pet accessory market. This line offers matching footwear for dogs and their owners.
InvestingPro Insights
Recent InvestingPro data provides additional context to Baird's analysis of Crocs Inc (NASDAQ:CROX). The company's P/E ratio of 10.01, and an even lower adjusted P/E of 7.77 for the last twelve months as of Q2 2024, align with Baird's view of Crocs as an attractive value proposition. This is further supported by a PEG ratio of 0.34, suggesting the stock may be undervalued relative to its growth prospects.
InvestingPro Tips highlight that Crocs is "Trading at a low P/E ratio relative to near-term earnings growth" and has been "aggressively buying back shares," which could potentially support the stock price. However, investors should note that the "Stock has taken a big hit over the last week," with a 1-week price total return of -15.01% as of the latest data.
Despite recent volatility, Crocs maintains strong fundamentals with a revenue of $4,055.95 million USD for the last twelve months as of Q2 2024, and an impressive operating income margin of 26.36%. These figures support Baird's optimistic long-term outlook on the company's growth potential.
For readers interested in a more comprehensive analysis, InvestingPro offers 13 additional tips for Crocs, providing a deeper understanding of the company's financial health and market position.
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