Crocs Inc. (NASDAQ: CROX) has been a true home run stock this year. Many of you have read my articles about Crocs since February and I have been recommending this stock since $15 on a split-adjusted basis. The shares are above $61, and the stock is still a buy!! Why?
I have written extensively that Crocs has surpassed the "fad-status" or the "niche-play" and is becoming a full-blown phenomenon. But to achieve phenom status, Crocs would have to develop products that go "north of the ankle." That is exactly what Crocs is doing. The company is launching a line of men's and children's apparel coming out this October. The clothing will be made from Crocs natural, proprietary resin material.
Further, the company has added several accessories to its line of products, including back packs, slosh-boots, t-shirts, etc. Crocs has also extended its branding identity by licensing its clogs and sandals to more than 100 American Universities and the NFL and NHL.
For a quick review, the beauty of the Crocs model is its tremendous margins. For an emerging growth company to post operating margins anywhere north of 15% is stunning: Crocs hit 30% for the June quarter. Before the June quarter, Crocs was sitting comfortably in the mid 20's%. The company has also expanded its distribution outlets to more than 27,000 retailers (12,500 domestically, 14,500 internationally).
Crocs realizes that to overcome investor perception of it being " a fad," extending of the product line is critical. The company is also offering a higher-priced line of women's shoes and boots in the $159-$309 range. Adding the men's and children's apparel lines will only strengthen this great growth story.
My price target on Crocs is $80 over the next 12 months. One would argue that the "easy money" has been made already and I would agree. However, my price target and other analysts' target has been a moving target -- all on the upside. Two quarters ago, my earnings estimate for 2008 was $1.95 -- that estimate is now $2.55 on $1.12 billion in revenues. This company has transcended the fad/niche stage and is indeed becoming the next Nike (NYSE: NKE).
Georges Yared is the CIO of Yared Investment Research.
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Reader Comments (Page 1 of 1)
8-27-2007 @ 12:26PM
Jeff said...
the next Nike - lol.
8-27-2007 @ 2:34PM
ann said...
Still short or ya Jiffy?
Ann
9-17-2007 @ 12:56PM
borisb said...
Georges is it still safe to pay upper 50s after huge run? 3 minor comments... with the global shoe market nearly $150 Billion iam not sure that CROCS even needs to venture out of this core speciality. also.. while this apples to apples perception may not be safely aligned...it would seem that CROCS is a better valuation PE/PEG then Under Armor unless shoe companies are worth drastically less. rumors are new fall line is selling relatively well and Crammer- Mad Money says the company is having a busy or "monster" quarter.