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Crocs Stock: Street Giving HEYDUDE a Chance
Stock Analysis & Ideas

Crocs Stock: Street Giving HEYDUDE a Chance

Innovative casual footwear company Crocs, Inc. (NASDAQ: CROX) recently announced the acquisition of private casual footwear brand HEYDUDE, which sparked a considerable level of sell-offs.

This was despite management saying that the acquisition will prove to be very beneficial to the top line. Management is still confident of Crocs’ ability to take sales to the $5-billion mark by 2026.

What Might Have Happened

The company is planning to fund a part of the transaction, which is expected to close in the first quarter of 2022, from a new term-loan facility. This might not be sitting well with some investors.

Further, any new acquisition, especially of a relatively unknown brand, comes with a lot of speculation among retail investors; and the remarkable 106% growth in share prices over the past year probably prompted investors to think that the prices have peaked.

When a company makes an acquisition, it pays a premium, which affects its bottom line and hence dividends. These are the probable reasons why Crocs shares experienced panic sell-offs.

Things Look Up from Here

The bear that had recently gripped the CROX stock seems to have loosened its arms a little, after the CEO clarified that the acquisition might boost Crocs’ sales growth greatly, particularly in the U.S. Northeast and coastal urban regions.

Also, most analysts from some of the top research firms gave optimistic views after the acquisition news, which is also why the share prices are stabilizing again.

Analyst Sam Poser from Williams Trading believes that an impending investor meeting with management in January, where Crocs is expected to preannounce its Q4 2021 results and update 2022 guidance, will push the stock higher.

“HEYDUDE is a casual footwear company, whose revenue is growing at a 20%+ rate over the last few years, and based on our checks, is gaining momentum,” opined Poser.

The analyst expects HEYDUDE to rake in $570 million in revenues in 2021, and between $700 million and $750 million in 2022. By 2024, it is expected to generate more than $1 billion in sales, with at least a 26% operating margin.

Poser reiterated a Buy rating on the stock and increased the price target to $300 from $220. He explained his stance by saying, “The increased price target reflects our confidence that the HEYDUDE brand will exceed its long-term targets. We continue to be 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.”

Wall Street Cautious but Positive

The Wall Street, though, is stepping into the rain with open umbrellas. The consensus has a Moderate Buy rating on the stock based on five Buys and two Holds. The Crocs stock price prediction says that the average price target is $207.29, indicating a 60.7% upside.

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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

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