StreetInsider.com's Rating Du Jour 11/27: Goldman Sachs Puts on a Pair of Crocs (CROX)
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Price: $123.18 -2.03%
Rating Summary:
20 Buy, 12 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 10 | Down: 13 | New: 20
Rating Summary:
20 Buy, 12 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 10 | Down: 13 | New: 20
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StreetInsider.com's Rating Du Jour for November 27, 2012 is Goldman Sachs' call on Crocs, Inc. (NASDAQ: CROX).
Launching coverage on the SMID footwear space with a Neutral rating, Goldman Sachs' new "Buy" rating and $17 price target, which suggests 39% upside, on Crocs stick out like a sore thumb.
The firm said investors are misinterpreting Crocs as a broken fad, although the company has strong near-term earnings visibility and a potential share repurchase catalyst.
Goldman sees a "realistic and achievable" 10%-15%CAGR for Crocs as it expands across Asia, Europe, and the America. Growth should come in the form of new stores, e-commerce, and wholesale channels.
The firm also sees margins moving higher as it grows in Asia, a 30% margin geography, and direct-to-consumer where margins and returns are accretive to the legacy U.S. wholesale business. Near-term, Goldman think management's 14%-15% operating margin target is achievable by 2013.
With roughly $300 million net cash position, or 30% of the market cap, Goldman sees the company putting some of it to work in the form of a share repurchase, which could be announced soon. The cash also provides support for the stock.
Q3 results reset Street expectations ahead of the company's core spring/summer selling season, Goldman noted. "Accelerating backlog growth reinforces customer confidence ahead of the company’s strongest and highest margin season," the analyst said. With the Street now at $1.56 for 2013 EPS, which is down from $1.74 per-Q3, Goldman said they "see an opportunity for CROX to guide up and exceed expectations as it enters its key 1H selling season."
Goldman also assigns an M&A rank of 2, reflecting a 15%-30% probability of M&A.
On valuation, the firm said currently at 8x 2013E earnings, shares are trading at a discount to peers (14x) and history (15x).
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Launching coverage on the SMID footwear space with a Neutral rating, Goldman Sachs' new "Buy" rating and $17 price target, which suggests 39% upside, on Crocs stick out like a sore thumb.
The firm said investors are misinterpreting Crocs as a broken fad, although the company has strong near-term earnings visibility and a potential share repurchase catalyst.
Goldman sees a "realistic and achievable" 10%-15%CAGR for Crocs as it expands across Asia, Europe, and the America. Growth should come in the form of new stores, e-commerce, and wholesale channels.
The firm also sees margins moving higher as it grows in Asia, a 30% margin geography, and direct-to-consumer where margins and returns are accretive to the legacy U.S. wholesale business. Near-term, Goldman think management's 14%-15% operating margin target is achievable by 2013.
With roughly $300 million net cash position, or 30% of the market cap, Goldman sees the company putting some of it to work in the form of a share repurchase, which could be announced soon. The cash also provides support for the stock.
Q3 results reset Street expectations ahead of the company's core spring/summer selling season, Goldman noted. "Accelerating backlog growth reinforces customer confidence ahead of the company’s strongest and highest margin season," the analyst said. With the Street now at $1.56 for 2013 EPS, which is down from $1.74 per-Q3, Goldman said they "see an opportunity for CROX to guide up and exceed expectations as it enters its key 1H selling season."
Goldman also assigns an M&A rank of 2, reflecting a 15%-30% probability of M&A.
On valuation, the firm said currently at 8x 2013E earnings, shares are trading at a discount to peers (14x) and history (15x).
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