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Will Crocs Stock Be a Top Stock in 2022?

By Rick Munarriz – Jan 12, 2022 at 11:50AM

Key Points

  • Crocs offered preliminary fourth-quarter results on Monday. It now sees revenue growth of 67% for all of 2021.
  • Analysts at Loop Capital and Piper Sandler have increased their price targets on the stock following this week's financial update.
  • Despite more than doubling last year and kicking off what should be its fourth year of double-digit growth, Crocs is trading for just 13 times forward earnings.

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It's been a good week for Crocs after a better-than-expected financial update and a pair of analysts jacking up their price targets.

Shares of Crocs (CROX 4.30%) are essentially where they were when the new year began, but a lot of interesting things are happening already in 2022 for the seller of unique and comfy footwear. This week kicked off with Crocs offering an upbeat financial update on Monday. That was followed by back-to-back days of analysts jacking up their price targets on the stock.

Crocs had a great 2021 for investors. The stock more than doubled after a year of impressive accelerating growth. Things could be even better in 2022. Let's break down what has already happened this week, and why the market is still underestimating the stock's potential.

A bright yellow Crocs shoe.

Image source: Crocs.

Filling the holes

Last year was pretty fulfilling for Crocs investors. The seller of patented closed-cell resin shoes was initially targeting top-line growth of 20% to 25% for all of 2021. A few upward revisions later, we see that revenue ultimately soared 67%. Monday's update was the final tweak to what had been a forecast of 62% to 65% growth back in late October. 

After seeing revenue climb 77% through the first nine months of the year, the 67% full-year target naturally means that growth slowed over the holiday quarter. Monday's update finds revenue rising 42% for Crocs' fourth quarter. However, that's better than 37% top-line gain that analysts were targeting. It follows a 57% surge in sales in the fourth quarter a year earlier, so it's pretty jaw-dropping to see two-year growth of 123% over the holidays -- a rough doubling of sales from the pre-pandemic baseline. 

Revenue growth on its own would be impressive, but the bottom line here is growing even faster. Crocs has been boosting its margin guidance, and now it sees its operating margin clocking in at nearly 30% on an adjusted basis for all of 2021. 

Wall Street's noticing the transformation that has taken place at Crocs since Andrew Rees stepped up as CEO in 2017. Crocs has now completed three consecutive years of double-digit revenue growth, and it's targeting sales to grow by at least 20% in 2022. If you're not impressed by an early-year forecast of revenue growth exceeding 20%, keep in mind this is exactly where we were a year ago. Things worked out pretty well. 

We've seen a lot of Wall Street pros reducing their price targets on stocks that have taken a beating in recent months, but Crocs is seeing price goals go the other way. 

On Tuesday we had Loop Capital's Laura Champine lift her price target on Crocs stock from $180 to $190, encouraged by Monday's financial update. On Wednesday it was Erinn Murphy at Piper Sandler boosting her target for the shares from $215 to $246. She's tapping Crocs as a top idea for 2022, encouraged by the growth trajectory and the opportunity behind the recent Hey Dude acquisition that was initially panned by the market. Murphy now sees a profit per share of $2.01 for the fourth quarter, up from her earlier estimate of $1.42 and the consensus analyst target of $1.39. 

Crocs has drawn a lot of attention as a revenue growth story, and that's fair. This new year should be its fourth year of double-digit growth. Even the mighty Nike (NKE 1.23%) -- the gold standard of footwear stocks -- hasn't posted back-to-back years of double-digit growth since fiscal 2005. Crocs is working on back-to-back-to-back-to-back years. However, with earnings growing even faster, Crocs is a growth stock that may also appeal to value investors. Crocs is trading for just 13 times this new year's profit target, and we're already seeing Wall Street bumping bottom-line goals higher. 

Rick Munarriz owns Crocs. The Motley Fool owns and recommends Nike. The Motley Fool has a disclosure policy.

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