What Happened?
Shares of footwear company Crocs (NASDAQ:CROX) fell 18.8% in the morning session after the company reported weak third-quarter earnings as management lowered full-year revenue guidance. The revision is mainly reflected in the HEYDUDE Brand, with full-year sales expected to be down approximately 14.5%, compared to the previous forecast of a 10% to 8% decline. Also, management added that it would take longer than expected for the brand to turn the corner. Similarly, its EPS forecast for the next quarter missed expectations.
On the other hand, Crocs exceeded analysts' constant currency revenue estimates during the quarter, and its EPS outperformed Wall Street's estimates. Zooming out, we think this was an underwhelming quarter, made more painful because peers like SKX and DECK reported strong quarters just last week.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Crocs? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Crocs’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. But moves this big are rare even for Crocs and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock gained 12.4% on the news that the company reported fourth-quarter results that exceeded analysts' revenue and EPS expectations, driven by a better-than-expected performance at both its Crocs and HEYDUDE brands. Its full-year 2024 revenue and earnings guidance exceeded Wall Street's estimates despite next quarter's earnings guidance coming in soft.
For 2024, the company expects its Crocs brand to grow revenue by 5% year on year and for its HEYDUDE brand to be flat to slightly up - an improvement from the 18.5% decrease HEYDUDE posted this quarter. Zooming out, this was still a decent, albeit mixed, quarter, showing that the company is staying on track.
Crocs is up 20% since the beginning of the year, but at $112.54 per share, it is still trading 29.5% below its 52-week high of $159.68 from June 2024. Investors who bought $1,000 worth of Crocs’s shares 5 years ago would now be looking at an investment worth $3,377.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.