Crocs To Gain From Double-Digit Growth Internationally Despite China Slowdown: Analyst Explains Why

BofA Securities analyst Christopher Nardone reiterated the Buy rating on Crocs, Inc. CROX, with a price forecast of $179.

According to Nardone, Crocs’ China business remains relatively small, allowing the company to achieve strong growth despite a tough macroeconomic environment.

A modest slowdown in China is unlikely to significantly impact the analyst’s forecast for sustained double-digit growth internationally.

The key issue is whether Crocs’ core business in North America will keep slowing down.

Last quarter, management noted a cautious U.S. consumer and projected flat North American sales for the second half of 2024, following a 5.5% increase in the first half of 2024.

In North America, Nardone predicts 1% growth for the second half of the year and believes that meeting this guidance could ease worries about the brand overheating, particularly if growth continues positively in the fourth quarter.

The analyst slightly raised the company’s 2024 earnings estimate to $12.87 from $12.80 per share.

Also Read: Crocs Q2 Earnings: Revenue And Profit Beat, Issues Mixed Q3 Outlook Amid HEYDUDE Struggles

According to the analyst, the stock appears undervalued at a 9x P/E ratio, with the potential for a higher multiple if execution continues to improve.

Heydude’s guidance suggests a significant sales boost in the latter part of the year, driven by shifts in product timing, new retail stores, and international distribution, with the impact of the Sydney Sweeney partnership already included.

Despite weak first-half results, strong margins and signs of sequential improvement could positively influence market perception, Nardone adds.

For fiscal year 2025, the earnings estimates are raised to $13.87 from $13.75. The analyst estimates that an average North American Crocs store generates a little over $3 million/store. The base case assumes that the average Heydude store is less productive.

Price Action: CROX shares are trading lower by 0.27% to $125.39 at last check Tuesday.

Photo via Wikimedia Commons

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