A global leader in innovative casual footwear Crocs Inc. (CROX) in Niwot, Colo., offers its products through wholesalers, retail stores, e-commerce sites, and third-party marketplaces in some 85 countries. It had 193 outlet shops, 107 retail stores, 373 company-operated stores, 73 kiosks and store-in-stores, and 14 company-operated e-commerce sites as of Dec. 31, 2021.

The stock’s price has retreated 34.6% year-to-date and 51.1% over the past three months to close its last trading session at $83.89. In addition, it is currently trading 54.4% below its 52-week high of $183.88, which it hit on Nov. 15, 2021.

The company’s shares retreated nearly 16% last week after it released its latest quarterly earnings report. CROX offered EPS guidance of $9.7 - $10.25 for the period, compared to the Thomson Reuters average EPS estimate of $9.9. This, along with several analysts' recent rating downgrades and reduced-price targets, makes CROX’s prospects look uncertain.

Here's what could shape CROX's performance in the near term:

Strategic Acquisition

This month, CROX announced the completion of its acquisition of HEYDUDE, a privately held casual footwear company. With the acquisition, CROX wants to grow HEYDUDE and generate significant shareholder value through its worldwide presence, smart marketing, and scalable infrastructure.

Ratings Downgrade

The Street downgraded the stock's rating to "c+” from “b-.” Furthermore, several analysts reduced their price targets for the stock. Stifel Nicolaus reduced their price target for Crocs shares to $101.00 from $130.00. In addition, Loop Capital reduced its price target on Crocs’ stock to $150.00 from $190.00.

Mixed Financials

CROX's revenue increased 42.6% year-over-year to $586.63 million for the three months ended Dec. 31, 2021. Its operating income grew 147.6% from its  year-ago value to $159.98 million. However, its net income declined 15.5% from the prior-year quarter to $154.85 million, while its EPS decreased 4.5% year-over-year to $2.57.

POWR Ratings Reflect Uncertainty

CROX has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. CROX has a D grade for Stability and a C for Growth. The stock 1.79 beta is in sync with its Stability grade. In addition, CROX's mixed financials are consistent with the Growth grade.

Among the 66 stocks in the A-rated Fashion & Luxury industry CROX is ranked #47.

Beyond what I've stated above, one can view CROX ratings for Quality, Momentum, Value, and Sentiment here.

Bottom Line

CROX achieved robust revenue growth across digital and direct-to-consumer channels in its most recent reported quarter, thanks to the rising popularity of its casual footwear. However, its disappointing guidance for the coming months and several rating downgrades have raised concerns about its future. Therefore, we think investors should wait before scooping up its shares.

How Does Crocs Inc. (CROX) Stack Up Against its Peers?

While CROX has an overall C rating, one might want to consider its industry peers, J. Jill Inc. (JILL), Shoe Carnival Inc. (SCVL), and Caleres Inc. (CAL), which have an overall A (Strong Buy) rating.

CROX shares fell $0.39 (-0.46%) in premarket trading Friday. Year-to-date, CROX has declined -34.57%, versus a -9.82% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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