Despite Upbeat Note, Crocs Still Struggling

Besides the underlying thesis of having renewed confidence in the business following a discussion with Crocs (CROX) CEO Ron Snyder, there were several specific takeaways from J.P Morgan analyst Robert Samuels' upbeat note published late Tuesday that are worth highlighting.

The analyst wrote that Crocs core product sales have not slowed despite the seasonal nature of its Beach and Cayman styles, confirming what its channels checks have indicated throughout the quarter.

On the international front, sales remain strong with pre-books for the first quarter starting out positive for the European market and the Asian market looking good ahead of an addition of 1,000 new retail outlets. Samuels adds that the ICR conference which management is expected to present at next Wednesday should provide a positive catalyst for the stock. Comfortable with previous guidance of 35-40% EPS growth in the next year and trading at about 11x 2008 EPS of $2.70, he believes the risk/reward is compelling.

Surprisingly, after bouncing back on these comments on Tuesday from a low of $26.63, climbing to a high of $31.15 before closing at $30.05 as the major market indices plummeted, Crocs shares could not make any attempt to follow through with a continued bounce. Though there is still reason to believe Crocs could bounce from these levels, especially with fundamentals backing the growth story, the trading action yesterday was downright discouraging.

Though the market maintained a positive bias early, Crocs could not manage a gain, briefly opening in unchanged territory before dropping. So far failing to confirm a bullish reversal from the previous trading session, the stock is lower by $1.91, or 6.2%, to $28.14 on moderate volume.

Comments

[JPM1101]

wake up the stock is over 30

[sliman]

The stock is definitely hurting but if the company is doing well, the stock will recover. It takes time to build a new base of strong hands.