BofA says Crocs is a rebound story, sees potential 22% upside in shares

Crocs (NASDAQ:) was initiated with a Buy rating and $128 per share price target, implying a potential 22% upside, at BofA on Tuesday.

In a note to clients, the investment bank’s analysts said that the company is a consistent grower and a rebound story at a broken multiple.

“The Crocs business has strong momentum having increased sales at a 25% CAGR since 2019 (sales +14% YTD),” wrote the analysts. “Some of this success has been obscured by the lackluster performance and market challenges facing the HEYDUDE (HD) brand, which we think is priced in.”

“We expect continued strong sales at Crocs coupled with incremental progress at HD will lead to multiple expansion from depressed levels,” the analysts added.

The investment bank also stated that the company’s leading margins and cash generation are key differentiators and remain underappreciated.

“Since adding leverage to supplement the HD acquisition, CROX has paid down nearly $1bn in debt and now has a 1.7x gross leverage ratio; we see room for further deleverage and incremental share repurchases,” said the analysts.