Crocs Stock Up 12% Today – Time to Buy CROX Stock?

The price of Crocs stock is going up nearly 12% in pre-market stock trading action this morning following the release of the firm’s third-quarter earnings report as the company beat both revenue and earnings estimates from analysts for the period.

For the three months ended on 30 September, Crocs reported revenues of $625.9 million resulting in a 72% jump compared to the same period a year ago while its gross margins experienced a 670 basis points increase at 63.9% compared to the third quarter of 2020. Analysts were expecting total sales of $642 million for the period.

Meanwhile, Crocs’s operating margin increased as much as 1,250 basis points to land at 32.4% resulting in a significant improvement in the company’s bottom-line profitability.

Finally, the firm reported diluted non-GAAP earnings per share of $2.47 per share for the period. This figure was 163% higher than the number reported during the same period a year ago while it exceeded Wall Street’s consensus forecast by nearly 33%.

“Globally, our teams are managing through the supply chain disruptions to mitigate the impact on our business. Despite the temporary disruptions, we expect 2022 revenues to grow over 20% from 2021 fueled by the strength of our brand and consumer demand globally”, stated Andrew Rees, Crocs’s Chief Executive Officer.

Can these positive results lift Crocs stock in the following weeks? In the following article, I’ll be assessing the price action and fundamentals of this top slippers manufacturer to outline plausible scenarios for the future.

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Crocs Stock – Technical Analysis

Back in September when I first wrote about Crocs stock I highlighted that the 50-day moving average was a crucial support area to watch. A break below this threshold occurred a few days ago and it endangered the rally but the decline quickly bottomed once tagging the upper bound of the bullish price gap left behind on 22 July.

Now, this morning’s uptick is pushing the stock back above this threshold and may fully reverse the latest downtrend on the back of a triple-bottom formation at $125 per share.

With momentum oscillators bouncing off neck-deep oversold areas, the runway for Crocs to keep surging on the days that follow the release of this report is wide open.

Assuming the pre-market uptick spills over to the live session, the stock’s short-term moving averages should once again be considered the most important areas of support for the price action.

All things considered, if positive sentiment for the stock picks up following these outstanding quarterly results, nothing would prevent Crocs stock from climbing back to all-time highs and possibly higher.

Crocs Stock – Fundamental Analysis

Revenue growth lately for Crocs has been outstanding but one of the most encouraging factors is the significant improvement that the company’s top and bottom-line profit margins have experienced.

In this regard, Crocs has moved from gross margins of around 48% back in 2016 to as much as 60% this quarter while operating margins have improved from 0% back then to over 30% in Q3 2021.

This improvement has been, and may continue to be, a major positive catalyst for the stock price as the fundamentals of the business keep strengthening.

Moreover, it is important to remember that Crocs has set forth some ambitious goals for 2026 including producing up to $1 billion in free cash flows while generating at least 50% of its revenues from digital channels.

As the company keeps pivoting to the online channel, it would be easier to post higher profit margins while higher volumes would also favor the generation of economies of scale.

Meanwhile, free cash flows for this quarter stood at $320 million, which gives us an annual run-rate that would already exceed that target if the company produces further positive quarterly results like this in the future.

Using that $1 billion FCF forecast as guidance to value the firm and based on its current weighted average common shares outstanding of 63.3 million the company is being valued at only 8.6x its forecasted FCF per share.

This forward valuation is particularly conservative and it makes Crocs stock highly attractive as reaching those levels seems highly feasible considering the firm’s latest performance.

With this in mind, it would be plausible to expect a sustained climb in the stock price in the following weeks, possibly on the back of upward price target revisions from analysts.

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