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Crocs: Comfortable is Profitable

The COVID-19 pandemic accelerated demand for casual and comfortable footwear. Thanks to the increased demand, Crocs (CROX), which highlights comfort and casual as its DNA and purpose (“Comfort without Carbon,” “Comfort for Our Communities,” and “Comfort for All People”), has had an incredible run in 2021.

The casual footwear giant is growing rapidly, reflected through massive growth in its top and bottom lines. Furthermore, its stock has appreciated over 138% this year and is up about 256% in one year. (See Crocs stock charts on TipRanks) 

It’s worth noting that Crocs’ revenues increased by 63.6% and 93.3% in the first two quarters of 2021. Meanwhile, its adjusted EPS more than tripled during the first six months of 2021. 

Thanks to the solid ongoing momentum in its business, Crocs once again raised its full-year revenue outlook. It now projects its revenues to increase by 60-65% in 2021, up from its previous growth guidance of 40-50%. Moreover, it expects the adjusted operating margin to be 25% in 2021, up from its earlier guidance of 22-24%. I have a bullish outlook on Crocs stock. 

In response to Crocs’ guidance raise, Sam Poser of Williams Trading raised his 2021 and 2022 earnings estimates. Meanwhile, Poser maintained a Buy rating on Crocs and increased the price target to $193 (29.2% upside potential) from $165.

The 5-star analyst stated, “We remain confident that innovative product, targeted digital marketing, and brand control will sustain the momentum of Crocs in the U.S., and increase its global momentum for the foreseeable future.”

Speaking of the future, Crocs recently announced its five-year growth framework, wherein it expects its annual revenues to grow over $5 billion by 2026. The projection reflects a CAGR (compound annual growth rate) of over 17% through 2026. 

To achieve this goal, Crocs stressed its intentions to grow its digital sales, accelerate growth in Asia, gain market share in sandals, as well as to improve product innovation and marketing.

Commenting on the long-term outlook, Crocs’ CEO Andrew Rees said, “We are confident in our ability to deliver this growth while maintaining industry-leading profitability.”

The company’s growing revenues will likely boost its profitability and cash flow. Crocs expects its adjusted operating margins to exceed 26% by 2026, while the company forecasts an annual free cash flow of over $1 billion.

On TipRanks, CROX stock has a Strong Buy consensus rating, based on 6 Buys and 2 Holds. The average Crocs price target of $160.14 implies 7.2% upside potential from current levels.

Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.

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