Crocs Gets An Upgrade On High Warm-Weather Demand

It's the heart of the summer, and that's a good thing for footwear company Crocs, Inc. CROX.

The Analyst

Pivotal analyst Mitch Kummetz upgraded Crocs from Hold to Buy, raising the price target from $15 to $21.

The Thesis

Despite analyst's disappointing projected earnings for Q2, Pivotal now believes Crocs exceeded expectations. Both spring and summer seasons have driven high revenue and growth, partly due to the high demand for warm weather products.

And It seems the weather will continue to play a vital role in the near future.

"We believe that 3Q sets up well for the company, as, given the buy-now, wear-now nature of consumers today, warm-weather product should sell well for B2S and into the early fall season, especially as warm weather is forecast for much of the US over the next few months. According to NOAA, for August-October, there’s a strong probability of above-normal temperatures,” Kummetz said in a note.

The analyst's surveys results show Q2 was strong, and the company should easily reach sales range for this quarter and the next. Kummetz pointed out that a key catalyst for Crocs is its consistency in the production of their brand. The company hasn't veered too far from products like clogs and sandals, and he considers this beneficial.

Based on historical data, Kummetz states retail orders in Spring 2019 will likely be more aggressive that those demonstrated this year.

Price Action

Crocs shares were trading up 6.4 percent to $18.23 at time of publication Wednesday. The company is scheduled to release Q2 earnings Aug. 7.

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