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The Money Man Behind Rick Santorum: Who Is Foster S. Friess?Why? These two companies have posted up brilliant quarterly results this past quarter and the previous 3-4 as well. Strong product momentum is certainly working in their favor. The recent results were not only brilliant but better yet, forward outlook and guidance were excellent. Crocs crushed expectations this past quarter by putting up 58 cents earnings per share on revenues of $234 million. Consensus expectations were for revenues of $194 million and earnings per share of 44 cents. I raised my 2008 numbers to $1.2 billion and earnings per share of $2.55. Apple put up revenues in the June 30 quarter of $5.41 billion and earnings per share of 92 cents, a full 20 cents ahead of expectations. My forward number for Apple (which I have raised for the last 5 quarters after results came out) are for September 2008 fiscal year end of revenues at $30 billion and earnings per share of $4.50.
Apple and Crocs are playing right into the sweet spot of their respective sectors. Apple has a whole raft of new
products flowing through to its customer base, from the iPhone to the new Mac computer. The retail store system stands at 185 now and foot traffic is accounting for more than 20% of Apple's sales. Investors were both excited and in some case, hung-up on initial iPhone sales at 270,000 units sold in the first 30 hours of availability. The product is both stunning and will provide an incredible revenue stream for Apple for the next 3-5 years. Already, new and different versions of the iPhone are planned and European and Asian launches are set for the latter part of 2007, early 2008. The momentum for iPhone is just beginning. The iPod and the new
Mac are run-away successes. Numbers for Apple are still set conservatively. The stock has backed off of the recent $148 high point and is currently trading at $126. My 12 month price target for Apple remains at $200. It is an opportunity to buy and accumulate shares during this market sell-off.
Crocs has way surpassed the perceived "fad stage" and is a full blown phenomenon in the making. With 27,000 sales/retail outlets selling the goofy looking shoes and the little "Jibbitz" accessories, Crocs has intelligently seeded the market place. Of the 27,000 outlets, 14,500 are outside the United States generating higher average selling price and of course better margins. The stunning aspect of the Crocs story and I cannot emphasize it enough is the massive operating margin, now at 30%. Young, emerging growth companies do not have operating margins anywhere near 30%! Without sacrificing its research and development and sales and
marketing expenses, this company is printing profits at 30 cents on each dollar of revenue. Crocs has a huge flow of new and higher priced shoes and boots lined-up for its already loyal customer base. It has also spread its appeal by licensing its shoes and sandals to over 100 American universities, the NFL and the NHL. With t-shirts and other relevant products in the fold, the visibility for Crocs only gets better. Crocs is currently at $53, off of its recent high of $61.
This again, is another opportunity for investors to buy this high growth, high quality name. My price target for Crocs is $80.
I have been recommending both Crocs and Apple all year and they have performed superbly, both doubling in price. But their respective stories are only getting bigger and better with earnings momentum in place. The similar keys to both stories are superior management teams and new, consistent product flow.
Georges Yared is the CIO of Yared Investment Research.
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Reader Comments (Page 1 of 1)
8-09-2007 @ 5:37PM
boris said...
well said. the $8.00 crox's dip is appealing. now obvious they love to take profits roundabout $60.
8-10-2007 @ 5:01AM
D Reece said...
George,
in regards to Crocs I would love to hear some of your thoughts on their Hockey and Lacrosse equipment by 'Fury' as well as prospects for 'Bite'. Both of these have huge potential in my view and have not been factored into the current share price.
Its a bold statement to make but... Crocs, as silly as it may sound to the uninitiated, is not only the next NKE, but is has just locked onto NKE and will be gunning for them with both barrels....
thoughts....
regards
Dylan
8-09-2007 @ 7:18PM
Steven James said...
Great post as always George. I wanted to know first, is your price target for CROCS a 12 month or next quarter target? The way the POS goes, your target could be passed by Xmas.
That said, I wanted to let everyone in on some "Crocs Secrets" here. The market doesn't even see what CROX is setting up to launch...
see these links:
http://www.furysport.com/Hockey/apparel/golf-shirts.aspx
Crocs is testing the water with their new Croslite Woven Fabrics which will REPELL ODOR
They are not going to shoot right at NKE and UA's designs but rather go after a larger market with more casual wear. It's starting in the Fury Division and will spread to the Crocs division once capacity is added.
Also Crocs has many many new shoes coming:
Winter Mammoth: http://shop.crocs.com/pc-440-4-mammoth.aspx?reqid=440&reqProdTypeId=41p&subsectionname=footwear§ion=products
High End Women's Line: http://www.youbycrocs.com/
Proven Golf Shoe Line: Bite Shoes .com
When all of these potential successes are factored into CROX do you not believe that CROX deserves a future P/E of 65 similar to UA? And on that news, wouldn't CROX potentially trade at $200+?
8-10-2007 @ 10:31AM
flowerguy said...
I genuinely feel that Crocs is aiming way beyond any footwear category and will attempt to put a pair of shoes on everyones feet. The styles coming are "normal". There will be winter boots, light workwear, restaurant shoes with a new anti-slip bottom and casual shoes. There is not a running shoe in sight.
However ...do yourself a favor and try golfing in a pair ..they are more comforatable and provide a better grip than my golf shoes.
Fury is a miss ... overpriced and not suffiently inovative
Clothing is up in the air till we see how is wears and is priced.
At this point seniors can pick up a pair of Crocs and wear them in lieu of their orthopedic shoes ... "Grandma don't do fads"...
8-10-2007 @ 3:33PM
FJW said...
One little financial problem with Crocs is the book value. if you look at the stockholder equity and divide that by the outstanding shares it figures about $4 per share. As I see it, the stock has just run to far ahead in a short time for a new company. Their earning is still low for the stock price. The two for one would have been great if the market was say around 11,000 or so. It's hard for me to see this stock in a view longer than a day trade. ifmwper2634@aol.com
8-10-2007 @ 11:22PM
Andrew Horowitz said...
Same story different day. Can we move on already. This is now tiring. Maybe your keyboard only has 7 different letters: A C O L X R P when you are buying stocks or something. How about talking about Alcoa (A) or maybe Praxair (PX) if there are no other choices you can think of.
I do have one serious question: Do we alway have to buy these, can we sell and then buy back if things look tough.
We bought AND sold these two names repeatedly this week. Rather profitable I must confess. Just a thought. (please refrain fro the buy-and-hold diatribe.
8-13-2007 @ 11:40AM
D Reece said...
Andrew Horowitz...
many have read your blog and in doing so have weighed and measured you analysis and you have been found wanting many many times.
your analysis of Crocs has been wrong on so many counts as you lack the foresight required to successfully invest or trade in such a high growth stock operating a vastly different business to any of its peers.
Mr Yared has on the contrary been spot on consistently with his calls. Your jealousy is clearly evident.
your opinion is both useless and unwanted.
but thanks for being a great contrarian indicator.
much love.
Dylan
p.s. why change a winning formula when it is going to win for a while to come? oh wait sorry do you need to buy you shares back to cover your short... is that why you are always so negative and so off the mark???