Apple (AAPL) and Crocs (CROX): The best is yet to come?

Posted Sep 26th 2007 10:10AM by Georges Yared
Filed under: Forecasts, Good news, Apple Inc (AAPL), Target Corp. (TGT), iPhone, Crocs Inc (CROX), Stocks to Buy

Last week I wrote separate posts on Crocs (NASDAQ: CROX) and Apple (NASDAQ: AAPL), and fortunately both stocks have done very well in the past 4-5 days. I wrote that you better hurry if you want to buy Apple under $150, as the stock had rebounded from a recent low of $118 to the $140's. Tuesday, the stock closed at a new 52-week high of $153.18. Crocs had been foolishly under attack by an absurd Associated Press article last week that linked Crocs shoes to some children's mishaps on escalators. I wrote that the attack on Crocs was a crock. The stock was drilled down to $53 during the life of the AP article, today the stock closed at a 52-week high of $64.38.

So what's going on and what's new with these two great performers?

Many retail stocks are under pressure as consumers have pulled back on their purse strings. Target Corp. (NYSE: TGT) indicated that previously endorsed numbers for the rest of 2007 would not be achieved. The stock gave up 4.59% on Tuesday. Crocs, however, is NOT a retail story; Crocs is a global story. Crocs distributes its shoes and other products through 27,000 retail outlets of which 14,500 are located outside the United States. More than half of Crocs' "selling space" is benefiting from the weak U.S. dollar, and the margins from overseas sales are just huge. Coupled with foreign currencies converted back to dollars, this sets up Crocs for a terrific September 30 quarter end. I have many other reasons why Crocs is a bona-fide, sustainable growth story, but I have written ad nauseam about the subject.

Apple is in the midst of a major, major product release cycle. The iPhone sales have been more than solid and production for the rest of calendar 2007 has been raised from 3.6 million units to 4.8 million. European and Asian distribution is just beginning and with Apple's revenue recognition model set for iPhone sales over 24 months, the visibility of Apple's numbers just goes up that much higher. Investors will reward "visible" numbers with a higher PE ratio.

Apple is also in the beginnings of a new iPod launch. The iPod installed base is over 110 million units strong. Talk about a willing audience for the upgrade cycle! It re-enforces the visibility theme. The revamped Mac computer is in its second quarter of sales and this product upgrade cycle should last into the next 4-6 quarters.

These two companies have performed superbly this year, both having doubled or more in price. Yes, the easy money has been made, but the fundamentals of both companies continue to be compelling. My 12-month price target for Crocs is $85 and for Apple, $200. Both price targets may prove to be conservative.

Georges Yared is the CIO of Yared Investment Research and the author of "Baby Boomer Investing...Where do we go from here?"

Tags: aapl, apple, crocs, crox, featured, iphone, ipod, mac

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Reader Comments (Page 1 of 1)

9-26-2007 @ 10:35AM

Ivan said...

No, the best is not yet to come ... especially for Crocs.

9-26-2007 @ 11:02AM

JJ said...

Great comments as always Mr. Yared, thank you. As for you "Ivan", what kind of evidence do you have that things are going down? Seems very clear you were short and have had your butt handed to you the past few days. How about you go and look at the CEO's comments from yesterday and tell me what was negative? You shorts have no clue on how they are changing the game and you will continue to lose if you keep dreaming of riding this stock down and thinking it is on the level of a Heely's.

9-26-2007 @ 11:49AM

AUGUST said...

Georges,
I do believe you're being conservative in your 12-month targets... but that's not a bad thing for the business you're in. More "certain than overblown," is the course we all appreciate about you.

I think MAC computers (not just iPods & iPhones), will continue to gain heightened interest and an increased depth of traction that we may not fully realize until several quarters from now. Their dual platform compatibility (OS X AND Windows), coupled with desktop computers that don't take up any more space than the footprint of the monitor (iMac) bring values that at this early point have incalculable potential for market penetration. I personally believe the sleek new iMac's will gain status as the "iPods," of desktop computing.

Benefitting Apple AND Crocs... the adoption of US trends by international markets is rapidly accelerating and spreading, as internet access, browsing and download speeds increase wordwide. Increased access to info about "what's popular," joined with the scaleable cost of Crocs in international markets leaves them in the "catbird seat," for profitable expansion.

So for both brands, I believe you are safely on target, but will be pleasantly surprised when they exceed expectation into the next couple of years.

Again thanks for the good info you always bring & thanks for listening.

AUGUST

9-26-2007 @ 7:39PM

captain underpants and the bringdown gang said...

crocs is a flavor of the month type deal in about 6-8 months they will be uncool.

10-17-2007 @ 3:51PM

Ed Kennedy said...

All you guys that are saying Trendy and overvalued please look at the price of crocs today when it hitanother high in 52 wks.Looks like we are "walking away " with the shoe market.No pun intended I'm a proud stock holder and enjoy Mr. Jared's articles andcomments lol Grandpappy

10-17-2007 @ 3:51PM