This stock is a survivor. In fact, one can argue that in 2007 to
2008, it suffered a near-death experience.
As the overall market fell precipitously,
absolutely plummeted. From a peak of $75.21 in October 2007, it
fell well more than 99% to a low of $0.79 in November 2008. If you
bought theshares on the day of their exact low, however, you'd
currently be ahead 2,228%! That makes 10-baggers seem piddling.
And the good news is that technical and
show the stock has significant potential upside from here. The
stock is on a tear, currently trading very near its two-year high
However, if the stock breaks a small shelf of resistance near
$23, then the window of opportunity toprofit from the trade could
Driving Croc's growth is aggressive product
. Like a crocodile itself, Crocs is strong and resilient. Although
the company still specializes in comfortable, colorful clogs, it
has reshaped its image and brand -- -- and continues to.
Originally developed to appeal to the U.S. yachting market,
today Crocs offers 250 shoe styles for every season and many target
markets. Crocs latest product is a kid's shoe, called the
Chameleon, which changes color after being hit with ultraviolet
light from the sun. The company now also sells winter boots and
even offers a heeled shoe, an attempt to appeal to the
comfort-seeking business woman.
Crocs footwear products and accessories are currently sold in 90
countries worldwide. The company has built a multi-pronged
distribution channel of international retailers, web stores,
outlets and kiosks.
Although opinions about the look of the shoe may be polarized --
some see Crocs as a fashion disaster, others as comfortable and
quirky -- there's no debating that, technically, the stock is in a
and appears to be on its way higher.
As shown on the chart, in November 2008 the stock completed its
descent from a $75 trendsetter to a widely-panned
Dismissed, then, as a "fad shoe company," Crocs has made quite a
comeback. Today, on the verge of the company's 10-year anniversary,
Crocs is currently testing $22.75, a level not seen since 2008.
The stock also recently bullishly broke out of an
pattern. Although Crocs is currently encountering a small shelf of
resistance near the $22.75 range, if it can break this level, then
it could continue to soar. There is literally no major resistance
in sight until the old high in the mid-$70s. If the overall
market stays healthy, then the next logical resistance is
round-number resistance at $30, but that's not necessarily the
stock's final peak. And if it were to test $30, traders would pick
up returns of nearly 31%.
Supporting the bullish outlook of the chart is the fact that the
50-day moving average
just recently crossed above the
200-day moving average
. This pattern, known as a "golden cross," is a highly bullish
technical indicator that often accurately forecasts a stock's
continued rise. The fact that
increased as the cross-over occurred gives further credence to the
From a fundamental standpoint, Crocs shows strong growth
In late April, the shoemaker reported better-than-expected
first-quarter results. Revenue for the period increased 35.8% to
$226.7 million, from $166.9 million in the year-ago quarter.
Analysts only expected revenue of $216.1 million. A revamped
product line, reflecting the company's all-season footwear drove up
sales across the globe: by 35% in the Americas, 33% in Europe and
43% in Asia.
For the upcoming second quarter, Crocs expects revenue to
increase 22.8% to $280 million, from $228.1 million in the same
quarter a year-ago.
As the company continues to expand its product offerings,
analysts project full-year 2011 revenue will rise 24.3% to $981.5
million, from $789.7 million last year. By 2012, analysts expect a
further 13.3% increase, with revenue reaching $1.1 billion.
Theearnings outlook is equally upbeat.
Due to increased
margins resulting from higher-priced products,
soared 242.9% to $0.24 per share from $0.04 in the year-ago
quarter. Analysts projected far more modest earnings growth to just
$0.19 per share in the quarter.
For the upcoming second quarter, the company has given guidance
of $0.43, roughly in-line with analysts' expectations of $0.44.
Earnings were 16% lower, or $0.37, in the same quarter a year
For the full 2011 year, analysts project earnings will rise
46.1% to $1.11 from $0.76 in the year-earlier period. With
sustained growth expected, analysts expect full-year 2012 earnings
will increase a further 22.5% to $1.36.
Action to Take -->
With all this in mind, I think it's safe to say Crocs is not only
recovering from its near-death experience -- it's flourishing.
Therefore, investors should plan to go long on the stock. However,
given the current weakness of the overall market, it's good to wait
and ensure the stock breaks out of the current shelf of resistance
near $22.73 before entering a position.
So I suggest a buy-on-stop order of $22.93 (good until Friday,
June1), a price target of $29.95 and a stop-loss of $15.85, which
is below a majorsupport level and just below the current
intersection of the upward-sloping 50-day moving average. This way,
the potential profit in this trade could be more about 31%.
-- Dr. Melvin Pasternak
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Disclosure: Neither Melvin Pasternak nor StreetAuthority, LLC
hold positions in any securities mentioned in this article.
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