Crocs Q3: The Main Business Seems To Be Fine, Speculative Opportunity

Summary

• Crocs' stock dropped nearly 20% after 3Q24 results, driven by declining operating margins and a delayed Hey Dude turnaround, despite international growth.
• CROX trades at a low P/E of 9x FY24 earnings because of concerns about margin sustainability and profitability.
• The Company's explosive post-pandemic growth now faces fashion risk, and Hey Dude's underperformance adds uncertainty to future revenue and margin stability.
• When looking under the hood, Crocs continues to grow in volumes and margins. The lag is generated by HeyDude and corporate (a part of which is impairment).
• Given the strength of the main brand, CROX seems overdiscounted at an expected 9% yield of forecast FY25 earnings.

Marc Dufresne

Crocs (NASDAQ:CROX) released 3Q24, including updated guidance for FY24 and some sneak peeks into FY25. Despite growth in Crocs, the market didn't like the results, probably because of the loss in operating margin (expected to be worse in FY25) and late HeyDude turnaround, leading

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in CROX over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.