Crocs, Inc. (NASDAQ:CROX)’s core business has strong momentum as the worst of its HEYDUDE brand issues are priced into the stock, according to Bank of America analysts.
In a note to clients, the analysts initiated coverage of Crocs stock with a ‘Buy’ rating and a $128 per share price objective, implying potential upside of 22% from current levels.
"We think Crocs' strong free cash flow (FCF) generation (13% yield) and ability to produce industry-leading operating margins (27%) remains underappreciated," the analysts wrote.
They also noted that continued strong expected sales coupled with incremental progress at HEYDUDE should lead to multiple expansion from current depressed levels.
Analysts at Bank of America added that growth can also be realized by further gains in sandals sales as well as expansion in the Asia-Pacific region.
Shares of Crocs edged up 0.4% to $104.98 in late afternoon trading on Tuesday.