Many of you know that I have been writing about Crocs (NASDAQ: CROX) since March of this year. I have been a bull on Crocs since the IPO in February 2006. The stock has been a homerun for many investor--and the nightmare of the short-sellers. The company has exceeded expectations quarter-in and quarter-out since the IPO. I have written that Crocs is a full-blown phenomenon and has the potential to one day challenge Nike (NYSE: NKE) as king of the hill. With all that said, I am moving my price target on Crocs from $80-85 to $100 within 12 months. Why?
Crocs has established, since its early days ( about 5 years ago), a global distribution model. Not only is the company taking advantage of the weak US dollar, but it has seeded its products all through Europe and Asia. The shoes carry a higher price point and when converted back into dollars, it bolsters its already high gross margins of 60%. The margins for Crocs are worthy of a case study at any major MBA program. For a young, growth company to post up operating margins in the 27-30% range is nearly unheard of. Young companies need to spend heavily in sales and marketing and in research and development all at the near-term expense of its operating margins--or pre-tax profits. The amazing fact is Crocs IS spending at the proper levels to develop its brand and marketshare and IT STILL PUTS UP THESE MASSIVE OPERATING MARGINS!
The new products will match the current margin structure, which is important. I estimate Crocs will earn $2.00 per share on revenues of $835 million for 2007, followed by revenues of $1.12 billion and earnings per share of $2.60 for 2008. I will admit right now, these numbers are conservative, very conservative. Many investors and analysts are working the Crocs model to figure a preliminary 2009 estimate. I believe Crocs can hit revenues of $1.55 billion and earnings per share of $3.40.
With this incredible growth in front of Crocs, coupled with a solid new product line and its existing product line selling magnificently, my 12-month price target is $100. The company can easily support a 30 price earnings multiple of 2009's $3.40 earnings.
The stock still has a short position that represents about 30% of the float. The shorts have been obliterated by this stock and will continue to be.
Georges Yared is the CIO of Yared Investment Research
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Reader Comments (Page 1 of 1)
10-11-2007 @ 1:24PM
lorraine donovan said...
I love Crocs and wear mine all the time. However, am a little concerned about the CEO and other management selling so many shares of their stock options. Please reply.
10-11-2007 @ 2:45PM
Keith said...
The insiders are taking the options and selling them for whatever reasons (big house, diversification)? They still own a lot of shares. If they sold all that they own then yeah that would worry me. CROX ROCKS!
10-11-2007 @ 3:41PM
JD said...
Just bought some today @ $67 and I'm a believer!
10-11-2007 @ 3:34PM
Ed Kennedy said...
I love my croxs and wear them almostnevery day. I hope the stock keeps going up and people keep buying the products.While I was still working and a small frog in a big pond I got a stock option and used it as a down payment on a new home.As long as the company keeps coming out with new products and Mr Yared keeps up the good press we are okay
10-15-2007 @ 10:00AM
mass said...
sell it now its overvalued it will go down soon to 30 dollars
10-15-2007 @ 10:06AM
Ed Kennedy said...
What a great feeling it is to have walked a mile in my croc's this morning and my diabetic feet feel f
ine. Checked the stock and it is up 2.85 a share Keep it going.Love it
10-16-2007 @ 11:12AM
mass said...
Hello Mr. George Yared
I read your recent article about CROX and I question you if you do get paid by this company to publish such an article about it.
People or investors today lost trust with people like you that don't know what they are talking about
and when they lose or make money you are still the winner, I hope one day you be regulated by the media and should be no free speech towards this when it comes to investing too bad people follow you guys
In my opinion CROX is no NIKE
And time will tell when you see this drops to a low level what are you going to do then tell them to buy more or sell ?
investor
10-16-2007 @ 1:06PM
Ed Kennedy said...
Dear Mass, You certainly are entitled to you opinion,but I am wondering how you can predict that crox will drop to a low of 30,I don't remember hearing saying it is a Nike.I keep a very close look at my stock and read the comments from the bloggers as well as well as the advisers that keep a very close look at the markets.I still contend that with good leadership it will continue to rise.
10-16-2007 @ 1:06PM
Ed Kennedy said...
Dear Mass, You certainly are entitled to you opinion,but I am wondering how you can predict that crox will drop to a low of 30,I don't remember hearing saying it is a Nike.I keep a very close look at my stock and read the comments from the bloggers as well as well as the advisers that keep a very close look at the markets.I still contend that with good leadership it will continue to rise.
10-17-2007 @ 9:43AM
mass said...
Dear Mr.Yared
Thanks for your reply
I understand you do not get paid by CROX its fine but I think lot of advisers do.
You did say it will be like Nike but my point is that this start up company is far away from what analysts are predicting, remember in late 90's too much of valuation lead us to lose a lot of money it was all into a predictions so this going to happen again
Look at CROX valuation compared to their standard
is way overvalued that's what I meant that it will go down to 30 dollars, and investors should well be educated into what you say and mean remember again that it was all the analysts to blame for inflating the stocks wright??
thank you
10-20-2007 @ 9:52AM
Alex said...
Crocs is a phenom. In addition to their shoes there are so many other potential uses for the Croslite material that the creation of potentially new products boggles the mind. Just think about smelly bowling shoes, football pads, and other sporting equipment worn under chlothing. it seems like an antibacterial material would work well here.
Alex
10-29-2007 @ 1:46PM
Ed Kennedy said...
Dear Mass,I'm sure glad I didn't take your advice on the 16th of October and sell my crox stock because when I checked this morning after the market opened ,sitting here wearing my croxs lo and behold it was up almost $4.00 a share.I plan to buy a bunch more when it splits again.there is more to come.You might want to reconsider LOL
11-05-2007 @ 5:42PM
Sin Nickel said...
A tip of the hat to mass and Alex...
Trading today (November 5th) around 40/share...
I'm considering getting in when the dust settles (couldn't pay those outragous multiples last month, we'll see how low it goes), because I think the company does have some solid fundamentals - just not at the prices it was trading at. 30s...heck maybe even 20s, those look attractive...