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Crocs Is Back In Spotlight, But Is It A Buy?

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Small-cap footwear maker Crocs ( CROX ) appeared in Tuesday's Stock Spotlight screen. Investors who were active when Crocs launched its IPO in 2006 probably recall the hot stock action the company's clogs inspired.

[ibd-display-video id=2102289 width=50 float=left autostart=true] The stock rose from a 14.27 close on its initial public offering Feb. 9, 2006, to a high of 75.21 on Oct. 31, 2007. A catastrophic decline followed: The stock traded below $1 a share 11 months later.

Annual earnings jumped 260% in 2006 and 147% in 2007. The company lost money in 2008 and 2009. Management attributed the collapse to economic conditions, products that reached a "mature stage in their product life" and competitors that developed cheap rivals to Crocs' clogs.

Where is Crocs now?

The Stock Chart

On the weekly chart, Crocs sketched a long double-bottom base, beginning in May 2015. The double-bottom base is shaped like a W. The middle peak plus 10 cents provides the potential buy point, in this case 12.64. The stock broke out in mid-December, but action after the breakout has been wild. The stock fell as much as 7.8% below the buy point, a level that would've chased out IBD-style investors.

An earlier base formed within the bigger consolidation led to a breakout in late September, but the stock eventually fell about 12% under the buy point.

In intraday trade Tuesday, Crocs was trading 7% above the 12.64 entry. That's too extended to buy, but Crocs could retreat and offer a second chance. The 5% buy zone runs to 13.27. Keep in mind that Crocs' volatility adds to the risk.

Fundamentals And Strategy

Crocs posted annual losses in 2015-16. The Street expects a loss of 7 cents a share when 2017 results are released. In 2018, analysts expect a profit of 26 cents a share.

In an investor presentation in January, the company said it was repositioning itself for long-term success. Steps involve closing unproductive stores, exiting noncore markets and reducing discount-channel distribution.

At least temporarily, the closing of unproductive stores will reduce revenue.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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