Crocs Shares Up 95% in 3 Months, Will it Continue?

It would appear that Crocs Inc. (NASDAQ:CROX) is back from the dead, YTD shares are up 419% and they are in the mid $6 range pushing near a new 52-week high on a daily basis, have they proved to Wall Street they are no longer a fad?

Last month Crocs Inc. (CROX) said it is on track to return to a profit next year after handily beating Wall Street estimates for the second quarter and shares have been on a roll.  Short interest is now only 11% versus the 30% it was just a few months ago and the future is looking good.

OPTIMISTIC CEO
Chief Executive John Duerden had the following to say on their last earnings call:
"Ttangible business improvements" helped results, as did positive reactions by consumers to new product in its retail stores and market-share gains in Asia.

"We expect to reduce our operating losses through the balance of this year and return to profitability next year," Duerden said.

"The rumors of our demise have been greatly exaggerated," said Duerden, quoting Mark Twain, during a conference call with analysts and dismissing the notion that the company's footwear for men, women and kids was a mere fad.

"There are those out there who have written us off," said Duerden. "This quarter's results financially, operationally and qualitatively show that this company and the brand are still very much alive."

THE NUMBERS
Despite the upbeat speech, Croc's amazing second quarter results where its fourth consecutive quarterly loss.  That loss came to $30.3 million or 36 cents per share, compared with a year-ago net profit of $2.1 million or 3 cents per share.

Revenue fell 11% to $197.7 million, the company said. It had been expecting $135 million to $160 million. While wholesale sales fell 28 percent, retail sales, which account for over a quarter of global revenue, rose 59 percent.

The company is restoring relationships with key domestic and European retailers who carry the Crocs brand and growth in those accounts were expected for next year, Duerden said.

Moreover, the company has begun to create fewer, but more compelling styles of shoes that are "very appealing" when presented well, he added.

Revenue fell 19% in the Americas, the largest region that includes the United States, and dropped 42% in Europe where sales were hurt by knock-offs. But they rose 30.5% in Asia, the company said.

Crocs said it expects third-quarter revenue of between $150 million to $160 million, with an adjusted loss per share ranging between 6 cents to 14 cents.

REALITY CHECK
Crocs has been a traders dream in 2009 and many have cashed in on its massive 400% upswing since the start of the year.  Besides the short squeeze fueling the rally, Crocs new management has been hitting it out of the park and it helps that Wall Street has finally lowered their estimates. 

Piper Jaffray upgraded Crocs on August 7th from Neutral to Overweight, following better than expected results after the close. The firm said global demand drives the path to profit in 2010. The firm also raised their price target from $3 to $7.50, shares of Crocs jumped 30% following the conference call and thumbs up from Piper.

Crocs is starting to shake its 'fad growth stock image', remember in 2007 when shares hit $69?  If you missed the CROX Bus in 2009 it may be a bit late to jump on the train.  Sure this stock can keep going, but after a 400% run and almost 100% in the last 3 months, it may be time to just add Crocs to the watch list.  Until more analysts up their target prices on CROX shares or just start to acknowledge that this company isn't done for its hard to justify buying into the Crocs story while its chasing down a new 52-week high.

SOURCE: http://www.reuters.com/article/hotStocksNews/idUSTRE57562U20090806

Disclaimer: No positions in any of the securities mentioned in this publication.