Loop Capital upgrades Crocs as it sees stock’s valuation attractive

Investing.com -- Loop Capital upgraded Crocs (NASDAQ:CROX) Inc. to "Buy" from "Hold" citing an attractive valuation and potential upside in the company’s direct-to-consumer business, particularly for its Hey Dude brand. The firm maintained its price target of $110.

“We think volatility around tariffs has created a buying opportunity,” analyst said.  

Crocs’ stock has declined about 10% year-to-date, compared to a 5% drop in the broader market, with Loop Capital attributing the weakness to concerns over tariffs on Chinese-made goods.

However, the firm sees the pullback as a buying opportunity, noting that Crocs has been shifting production away from China for years, while Hey Dude has reduced its China exposure to 27% of total production, down from 58% a year ago.

Loop Capital believes DTC business could outperform expectations in the first quarter, as the brand laps easier comparisons after a 17% overall revenue decline and an 11% drop in DTC last year.

Management is optimistic about marketing initiatives, including a partnership with actress Sydney Sweeney, which could help boost brand awareness.

Crocs management also reported a well-managed inventory position in its core brand, despite investor concerns over promotions. The company expects international markets, particularly China, India, and Western Europe, to contribute to growth.

Loop Capital’s $110 price target is based on a discounted net operating profit after tax model. Crocs shares currently trade at 8 times the firm’s 2025 EPS estimate of $12.75 and 6 times EV/EBITDA, levels the firm views as compelling.

Despite ongoing uncertainty, the firm said investors should “step into the stock” as Crocs laps easier year-over-year comparisons for Hey Dude in the first quarter.