The Crocs Stock Sticker Shock

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This year has been strange, to say the least.

We’ve seen record economic figures — and not good ones. We’ve seen “unlimited” stimulus from the Federal Reserve — thanks Jerome!

And we’ve seen the markets rally back near all-time high levels despite a global pandemic — thanks again, Jerome!

But, just when you thought 2020 couldn’t get any uglier … we catch wind of Crocs Inc.’s (Nasdaq: CROX) big-time comeback. Now, I’ll be the first to tell you that I’m no fashion expert. If I happen to look good on occasion, it’s probably my wife’s doing.

But … Crocs? Really, America?

Companies like Justice, Pier 1 Imports, True Religion, J. Crew and Neiman Marcus all filed for bankruptcy during the pandemic. But Crocs clings on?

To understand why, we have to dive deep into the bowels of American anti-culture. Remember bell-bottoms? Disco? The big-hair ‘80s? Flannel shirts and Doc Martens? Goth?

These were all anti-culture trends. In fact, J. Crew rode the alternative, flannel-wearing anti-trend to prominence during the early ‘90s.

Like Kurt Cobain riding in with screeching vocals and ugly guitar riffs to destroy the carefully crafted 80s rock scene, Crocs is Generation Z’s anti-culture. Ugly is in.

This flavor of trendy anti-trend began roughly a year ago. Analysts at Piper Jaffray called it back in July 2019, shortly after Crocs launched a successful collaboration with Vera Bradley of all brands. CROX stock went on to more than double before the end of 2019 as the new ugly trend gained momentum.

And then, 2020 happened in all its ugly glory. CROX tanked alongside every other retailer in reaction to the pandemic.

Gone are the Vera Bradley collaboration days. Now Crocs is teaming up with Kentucky Fried Chicken.

Yes, you read that right. And the crossover is just as ugly as you’d expect. Complete with “wild charms that look and smell like chicken drumsticks,” the KFC x Crocs collaboration quickly sold out despite their $60-per-pair price point.

I can hear you now: “Surely, this can’t work!” It can, and don’t call me Shirley.

Thursday, Crocs reported ridiculously outsized second-quarter earnings. In fact, the company posted a profit of $1.01 per share. The consensus expected just $0.12 per share. That’s a 741% surprise! Revenue came in at $331.55 million, besting Wall Street’s targets by nearly 38%.

It’s safe to say that if 2020 were a shoe … it’s a Croc. It has to be Crocs. No other shoe is this ugly.

But the CROX rally is no laughing matter, up more than 259% from its March bottom. The question on all our minds right now is: “Can this rally hold?”

Again, I’m no fashion expert. But, having spent the better part of the past decade working from home, I am a bit of a comfort expert. I don’t own a pair of Crocs. But if nurses and doctors wear them all day long, they must be comfortable.

Furthermore, the pandemic-induced lockdowns have clearly ushered in a new trend of comfort over chic. Why wear fancy shoes if you don’t go anywhere to show them off?

Ugly is no longer just an anti-culture movement — it’s a practical one. Because of this, I see Crocs continuing to beat expectations heading into next year or even by the end of the pandemic … whichever comes first.

Now, this is the part where I tell you not to go chasing ridiculous rallies — or waterfalls. There’s quite enough FOMO going around on Wall Street right now. However, CROX is certainly worth putting on your investing short-list, especially if the stock consolidates its recent gains.

Take it from me: It pays to be comfortable … no matter how ugly it is. This message brought to you by red, fuzzy plaid dad slippers.

Finally, a shameless self-plug: In Great Stuff, we cover these run-wild stories, telling you how to avoid the FOMO chase … and instead, which high-flying opportunities you need to take. Click here to check out what market tomfoolery we’re writing about today!

Fair warning: There will be Crocs.

Until next time, be Great!

Joseph Hargett

Editor, Great Stuff

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