Here's Why Crocs (CROX) is a Solid Investment Pick for 2021
Strength in the company’s brands, strong business momentum, impressive digital platform and robust demand for casual footwear amid the pandemic are factors working in favor of Crocs, Inc. CROX. Additionally, the company’s stock picked pace following its accelerated revenue view for 2021, backed by expectations of continued business momentum. Moreover, investors were pleased with its favorable view for the fourth quarter and 2020.
Backed by the aforementioned positives, shares of this Zacks Rank #1 (Strong Buy) company have gained 46.3% in the past three months compared with the industry’s growth of 14.1%. It has also comfortably outpaced the Consumer Discretionary sector and S&P 500’s growth of 17.1% and 10.6%, respectively, in the same period. Additionally, the company’s expected long-term earnings growth rate of 15% and Momentum Score of B indicate that the stock is likely to retain positive momentum in the days ahead.
Let’s Check the Factors Aiding the Stock
Crocs has been benefiting from brand strength and healthy demand in its key products, including Clogs, Sandals, Jibbitz and Visible Comfort technology. It envisions strong potential for growth in sandals in the near term, with a focus on female customers. Apart from this, the company has been gaining from robust online momentum amid the pandemic.
It is making significant progress in expanding digital and omni-channel capabilities. While stores remained open for limited hours during the third quarter, Crocs witnessed strong online demand and leveraged its omni-channel capabilities to fulfill online orders and serve customers. This resulted in a 36.3% year-over-year increase in digital sales in the third quarter, marking the 14th successive quarter of double-digit e-commerce growth. The solid momentum in the digital platform is likely to continue in the days ahead as consumers are increasingly shifting to online shopping.
On Jan 20, 2021, Crocs raised its view for fourth-quarter and 2020 revenues. Moreover, it provided an accelerated view for 2021, driven by strong business momentum amid the pandemic-led rise in demand for casual footwear and increased digital sales. The company now anticipates fourth-quarter 2020 revenues growth of 55% to $407-$410 million compared with the earlier stated 20-30% growth.
Moreover, it predicts 2020 revenues of $1,381-$1,384 million, suggesting year-over-year growth of more than 12%. This marks a sharp increase from the previously stated 5-7% revenue growth for 2020. Also, the company anticipates the current momentum and brand strength to continue in 2021. Consequently, it expects revenue growth between 20% and 25% for 2021.
These factors suggest a robust growth path for the company, even though the pandemic-led headwinds might persist at least in the near term.
Other Stocks to Watch
Ralph Lauren Corporation RL has an expected long-term earnings growth rate of 8.5%. The company sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Steven Madden, Ltd. SHOO, also a Zacks Rank #1 stock, has an expected long-term earnings growth rate of 15%.
Deckers Outdoor Corporation DECK has an expected long-term earnings growth rate of 18.6%. It presently has a Zacks Rank #2 (Buy).
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