The analyst says the stock is oversold (CROX -31% vs S&P Retail -11% over the last 3 months), and risk/reward is now favorable given a highly discounted P/E of about 6.5x (5-year average 16x) and EV/ EBITDA of ~6x (5-year average 11.5x).

Crocs surprised to the upside in 1H and the analyst sees further momentum including attractive overseas opportunity. 

Despite recent challenges, CROX maintains excellent operating margins that likely have upside potential, noted the analyst.

The Crocs brand remains strong, and the HEYDUDE brand affinity is holding up despite near-term challenges, according to the analyst.

The analyst says valuation is very attractive relative to peers who have similar growth expectations but lower margin profiles versus CROX.

Moreover, the analyst noted that Crocs’ strong free cash flow enables accretive buybacks and debt paydown.

The price target is based on a P/E of 8.5x on the analyst’s 2024E EPS of $13.04.

Price Action: CROX shares are trading higher by 1.99% at $86.13 on the last check Friday.