Crocs Breaks out From Channel on Strong Guidance

Crocs, Inc. (CROX) shares soared more than 8% during Monday's session as fourth quarter, full year, and fiscal 2021 guidance came in ahead of expectations.

Key Takeaways

  • Crocs shares moved sharply higher after fourth quarter, full year, and fiscal 2021 guidance came in sharply higher than analysts expected.
  • The company believes that its recent strength will continue into fiscal 2021, when it projects 20% to 25% top-line growth.
  • The stock broke out from its price channel with favorable moving average convergence divergence (MACD) momentum but could see some near-term consolidation given the overbought relative strength index (RSI) reading.

The company expects fourth quarter revenue to increase 55% to $407 million to $410 million, which is sharply higher than the $330.07 million consensus estimates and higher than its previous range of 20% to 30% growth. Full-year revenue is projected to grow 12% to $1.381 billion to $1.384 billion, versus a consensus of $1.3 billion and up from guidance of 5% to 7% growth.

Next year, the company predicts growth of between 20% to 25% on the top line, which is higher than the 13% consensus estimate for growth in 2021.

Chart showing the share price performance of Crocs, Inc. (CROX)

From a technical standpoint, the stock broke out from its price channel to fresh highs. The RSI moved into overbought territory with a reading of 72.52, but the MACD experienced a bullish crossover. These indicators suggest that the stock could see some consolidation above trendline support over the coming sessions, but the intermediate-term trend remains bullish.

A price channel appears on a chart when a security's price becomes bounded between two parallel lines. Depending on the direction of the trend, the channel may be termed horizontal, ascending, or descending.

Traders should watch for the stock to consolidate near trendline support levels at around $72.00. If the stock breaks down from these levels, it could move back into its price channel marked by a high of $72.00 and a low of $64.00. A further breakdown from these levels could lead to a move toward reaction lows of around $60.00 or prior highs of $44.00, although that scenario appears unlikely given the fundamental strength.

The Bottom Line

Crocs shares moved sharply higher during Monday's session after fourth quarter, full-year, and fiscal 2021 guidance came in higher than expected. With the RSI reaching overbought levels, traders could see some near-term consolidation, but the overall trend remains bullish.

The author holds no position in the stock(s) mentioned except through passively managed index funds.

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