Crocs Stock Gives Up Ground After Strong Q4 Guidance

Traders take profit despite strong forecast

Crocs, Inc. (CROX) shares fell more than 1.5% during Monday's session despite robust fourth quarter earnings guidance. The iconic shoe company expects 2019 revenue to grow 13% over 2018 revenue of $1.09 billion, with adjusted gross margins of 51%, excluding a 100-basis-point charge associated with its new U.S. distribution center. GAAP gross margins are projected to reach 50%; sales, general, and administration (SG&A) costs are expected to be 40% of revenue; and adjusted operating margins are projected to be 11%.

"We delivered the strongest fourth quarter in Crocs' history," said President and CEO Andrew Rees. "Our positive brand momentum allowed us to deliver strong DTC growth combined with excellent wholesale sell through. Our projected fourth quarter results represent a strong finish to a record year, and we anticipate building on our 2019 growth trajectory in 2020."

Analysts have been largely bullish on Crocs stock over the past several weeks. In early January, Pivotal Research called Crocs a top pick for 2020, citing its "strong sprint backlog," with a Buy rating and a price target of $49 per share. CL King and Piper Jaffray had similar opinions in late December, and those firms maintain Buy and Overweight ratings, respectively, on Crocs stock.

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

From a technical standpoint, the stock gave up some ground after reaching fresh highs. The relative strength index (RSI) fell from overbought territory with a reading of 64.67, while the moving average convergence divergence (MACD) could be on the verge of a bearish crossover. These indicators suggest that the stock could see some near-term profit taking.

Traders should watch for a move to retest trendline support and the 50-day moving average at $37.53 as traders take profit before the stock resumes its uptrend. If the stock moves higher, traders should watch for a move toward R1 resistance at $45.19 or R2 resistance at $48.49.

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

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