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Investing.com - BofA Securities lowered its price target on Crocs (NASDAQ:CROX) to $99.00 from $135.00 on Friday, while maintaining a Buy rating on the footwear company’s stock. The stock, currently trading at $74.39, has declined over 23% in the past week and according to InvestingPro analysis, appears undervalued based on its Fair Value metrics.
The price target reduction follows what BofA described as "disappointing" third-quarter guidance from Crocs, though the firm believes the risk/reward balance remains favorable with potential for fundamental improvements beyond the third quarter. InvestingPro data shows strong fundamentals with impressive gross profit margins of 59.25% and a healthy free cash flow yield of 22%.
BofA highlighted that Crocs’ international business, which represents approximately 50% of total sales, grew 16% in the second quarter, and the firm projects low double-digit currency-neutral growth is feasible for the next several quarters on average.
Despite sales weakness in the second quarter, Crocs maintained strong margins, with the Crocs brand gross margin flat at 64.2%, which BofA noted was a record level for the company.
While BofA expects some near-term pressure from tariffs and product mix shifts as sandals growth outpaces clogs, the firm believes Crocs’ gross margins will remain healthy due to the company’s focus on controlling promotions, which should help maintain a strong free cash flow profile with high-teens FCF margins.
In other recent news, Crocs reported strong financial results for the second quarter of 2025, with adjusted diluted earnings per share of $4.23, exceeding the forecast of $4.02. The company’s revenue also surpassed expectations, coming in at $1.15 billion compared to the anticipated $1.14 billion. Despite these positive figures, Crocs issued guidance that significantly fell short of consensus expectations, leading to a downgrade by Williams Trading from Buy to Hold, with a reduced price target of $80.00. Barclays (LON:BARC) also downgraded Crocs from Overweight to Equalweight, citing macroeconomic uncertainty and challenges with the HEYDUDE brand. Barclays adjusted its price target to $81.00 from $119.00, noting a consumer shift towards athletic footwear in the U.S. market. These downgrades reflect concerns over Crocs’ future outlook despite its current earnings success. Investors are advised to consider these recent developments as they assess their positions.
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