On Monday, BofA Securities adjusted its outlook on Crocs (NASDAQ:CROX) stock, reducing the price target to $144 from the previous $147 while retaining a Buy rating.
The adjustment comes as BofA Securities anticipates an impact on Crocs’ first quarter earnings per share (EPS) due to increased Selling, General & Administrative (SG&A) expenses and updated foreign exchange rates in light of the recent strength of the U.S. dollar.
Analysts at BofA Securities have revised their first quarter EPS estimate for Crocs downward by $0.23 to $2.57, which is 8% below the consensus. This revision takes into account several factors including the timing of sales affected by the Easter holiday moving into the second quarter and the comparison with the previous leap year.
Additionally, Home Distribution (HD) sales growth is expected to decline more than it did in the fourth quarter, and there is anticipation of a continuation in investments, especially in HD marketing and talent.
While near-term challenges exist, InvestingPro analysis reveals the company maintains robust profitability with a 57% return on equity and healthy revenue growth of 3.2% over the last twelve months.
Despite these short-term challenges, BofA Securities expects Crocs’ margins to begin improving in the second quarter and even more significantly in the second half of the year as the company starts to lap the outsized investments in HD. The new price target of $144 reflects an unchanged 11.5 times price-to-earnings (P/E) ratio on the firm’s reduced fiscal year 2025 EPS estimate of $12.50, down from the previous forecast of $12.84.
The analysis by BofA Securities suggests a cautious yet optimistic outlook for Crocs’ performance in the upcoming quarters, with a focus on the potential for margin improvement later in the year. The price target reduction aligns with the firm’s updated projections and market conditions, particularly the impact of foreign exchange rates on the company’s financials.
In other recent news, Crocs, Inc. has seen a flurry of activity from analysts. Piper Sandler has reiterated an Overweight rating on Crocs, maintaining a price target of $125.00, while Williams Trading has reduced its price target to $126 from $140 but retained a Buy rating. KeyBanc Capital Markets also adjusted its outlook on Deckers Outdoor (NYSE:DECK) Corporation, raising the price target to $213 from $190 and maintaining an Overweight rating.
These changes followed meetings with Crocs’ CFO Susan Healy and VP of IR & Strategy Erinn Murphy, a review of the 2025 product lineup for both Crocs and its subsidiary brand, HEYDUDE, and a comprehensive review by Williams Trading of the retail landscape.
In addition to these developments, Crocs has expanded its senior revolving credit facility to $1 billion, marking a $250 million increase. This financial move is expected to bolster Crocs’ future growth initiatives.
On the earnings front, Crocs reported a 2% year-over-year increase in its third quarter 2024 earnings, with consolidated revenues reaching $1.1 billion. Despite a dip in revenue for its subsidiary brand, HEYDUDE, the company’s direct-to-consumer sales saw a 5% rise, and the Crocs brand enjoyed an 8% revenue increase.
Lastly, Needham initiated coverage on Crocs with a Buy rating, citing the company’s international brand growth and strong free cash flow, while Loop Capital downgraded Crocs from Buy to Hold, reducing the price target to $110 due to concerns over the current sales trajectory and challenges faced by the HEYDUDE brand.
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