Erinn Murphy downgraded Crocs from Overweight to Neutral with an unchanged $31 price target.
Crocs' management deserves credit for executing a "fantastic" turnaround over the years, Murphy said in the Tuesday downgrade note. (See her track record here.)
Most notably, EBIT margins were near the breakeven point in fiscal 2016 and are projected to rise to more than 10 percent in fiscal 2019, the analyst said. Revenue is also expected to rise by a "solid" mid-single digit in fiscal 2019, with sustainable momentum into next year, she said.
The Street is modeling for similar mid-single digit revenue growth this year and next year, implying that the improvement is already reflected in the stock, Murphy said.
Crocs' performance in Piper Jaffray's Sprint 2019 survey of teens were "slightly weaker" than expected, even when adjusting for weather and timing issues.
Crocs' brand popularity fell from No. 13 in last fall's survey to No. 19. Among teens in the upper-income demographic group, the brand ranked No. 20, while it ranked No. 16 among the average-income group.
The potential upside in Crocs' stock versus its downside is "less than 1:1," which implies that a move to the sidelines is warranted, Murphy said.
Crocs shares were down 1.83 percent at $26.76 at the time of publication Tuesday.
Crocs Gets An Upgrade On High Warm-Weather Demand
Crocs, Shoe Carnival Surge Higher After Susquehanna Upgrades
Photo via Wikimedia.
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