This Crocs Insider is Buying the Dip, Should You?

Since reporting its results for the third quarter, shares of footwear brand Crocs (CROX) have been on a downward spiral. Disappointed by the ongoing weakness of its HEYDUDE brand, investors have been on a selling spree of the stock. After a 19% plunge on Oct. 29, the stock is now down by 27.6% over the past month, and has pulled back by nearly 38% from the two-year high set in June.

However, at least one company insider seems to think that now is an opportune time to load up on the company's stock, making his biggest purchase of CROX shares so far this year. Should you follow suit and buy the dip? Here's a closer look.

About Crocs Stock

Founded in 2002 and based out of Colorado, Crocs (CROX) is a global footwear leader known for its iconic casual clogs. The company designs, manufactures, and distributes casual footwear for men, women, and children under the Crocs brand, and closed the acquisition of the HEYDUDE brand for $2.5 billion in February 2022. CROX currently carries a market cap of $6.13 billion.

Despite the stock's recent weakness, CROX is up 10% on a YTD basis, and 25% over the past 52 weeks.

Insider buying is often viewed as a bullish signal, and Director John Replogle - a retail industry vet - has been a repeat buyer of CROX this year since joining the board in January. 

On Oct. 30, right after the stock's negative earnings reaction, Replogle purchased 2,240 shares of CROX at an average price of $112.599 per share for a total value of about $252,222. Replogle now owns a 0.0157% stake in the company.

This was Replogle's third tranche of insider buying this year, after previous purchases of just under 2,000 shares each in March and August. The late October purchase was his largest yet, suggesting he was taking advantage of the dip in the shares. 

Priced at 8.15 times forward adjusted earnings and 1.50 times sales, CROX is definitely cheap right now, relative to its historical valuations. But is the stock a good value? 

Upbeat Q3 Results

While investors were rattled by weakness in the HEYDUDE brand, Crocs beat expectations for third-quarter revenue and earnings. Revenues rose 2% from the previous year to $1.06 billion, with core Crocs brand revenues rising 7.4% to $858 million. Adjusted earnings increased by 10.8% to $3.60 per share, outpacing the consensus estimate of $3.10. In fact, this marked the 16th consecutive quarterly earnings beat from Crocs.

Cash flow from operations also improved, arriving at $670.5 million for the nine months ended Sept. 30, up from $580.7 million in the year-ago period. The company exited the quarter with a cash balance of $189.5 million, much higher than its short-term debt levels of about $67 million.

Overall, over the past five years, Crocs has grown its revenues and earnings at impressive CAGRs of 28.04% and 56.58%, respectively. 

Analysts are projecting the company to continue its outsized growth, with forward revenue and earnings growth rates estimated at 6.01% and 14.48%, compared to the sector medians of 3.24% and 5.34%, respectively.

Strategic Drivers for CROX

The company's focus on product innovation and strategic marketing initiatives is paying dividends in driving top-line growth. Management's confidence in their global strategy is reinforced by the strong performance of their flagship products like the Classic Clog and the expanding market share of their Sandals and Jibbitz segments, buoyed by targeted campaigns such as the "Live Life Fully" initiative, which proved effective during key retail periods like the back-to-school season.

The push to diversify and appeal to broader demographics, such as attracting a male audience through the Echo Franchise and fostering partnerships like the McDonald’s (MCD) x Crocs Happy Meal collaboration, has generated impressive engagement. The success of this partnership, evidenced by 400,000 units sold and a staggering 10 billion brand impressions in 48 hours, is indicative of robust brand momentum.

Targeting younger audiences, particularly through the appointment of Sydney Sweeney as a global brand ambassador and the launch of a TikTok shop, demonstrates the company's ability to adapt and resonate with younger, trend-savvy consumers. The rollouts of new collaborations with popular franchises like Beetlejuice and SpongeBob also reinforce the brand’s pop-culture appeal.

While the HEYDUDE acquisition has faced challenges, recent signs of sequential growth may signal stabilization following inventory corrections and strategic adjustments. The brand's pivot towards a premium outlet strategy has led to higher average selling prices (ASPs) and improved digital sales metrics. This approach, coupled with investments in talent and brand awareness, could help drive future growth and profitability.

International expansion remains a vital growth pillar, with strong performance noted in markets such as Australia, France, Germany, and China. This broadening international footprint supports the company's global ambitions and underlines its ability to capture market share across diverse regions.

What's Next for CROX Stock?

Crocs insiders aren't the only group feeling optimistic. Analysts have assigned the stock a consensus rating of “Strong Buy,” with a mean target price of $143.20. This implies an expected upside potential of about 39.4% from current levels. 

Out of 12 analysts covering CROX stock, 9 have a “Strong Buy” rating and 3 have a “Hold” rating.