Barclays has rejected advice to buy Crocs shares. Why does BofA disagree with him?

An analyst at Barclays downgraded shares of rubber footwear maker Crocs after a weak quarterly report in which the company posted a loss due to write-downs on its Heydude brand and warned of a drop in revenue in the third quarter. Crocs is suffering from weakening consumer demand in the US, high duties on imports from Asia and lower orders from retailers. In addition to Barclays, the advice to buy shares of Crocs also refused from the analyst Stifel, but Bank of America looks at the prospects of the company more optimistic.

An analyst at Barclays downgraded Crocs shares from Overweight (above market) to Equal Weight (on par with the market), and cut the target price from $119 to $81 - up 9% from the Aug. 8 close. According to the analyst, the downgrade is due to a number of negative factors Crocs is facing: weak pre-order momentum, increasing US consumer interest in athletic footwear and deteriorating results of the Heydude brand, which Crocs bought in 2021 and which now requires further investment .

Barclays also noted that US duties are driving up costs, and Crocs' ability to pass them on to consumers is limited. Additional caution is caused by deteriorating sales dynamics on the back of growing inventories - this may increase pressure on margins in late 2025 and early 2026, the bank said.

At the same time, Barclays analysts pointed to the strong cash flow, active share buyback program and relatively low ratio of their value to projected earnings. In their opinion, it partially restrains the downside risks of the company's securities.

In addition to Barclays, Crocs shares were downgraded from Buy to Hold by analysts at Stifel, reports Investing.com. They cut their target price too, from $127 to $85. Among the key factors weighing on revenue and earnings, analysts cited sluggish U.S. consumer demand, restrained purchasing policies by retailers and reduced promotional activity. All of these could hold back Crocs sales through 2026, according to Stifel. Despite strong margins and stable cash flow, uncertainty around future growth rates is reducing the brand's investment appeal, analysts said.

Bank of America is more optimistic: although it reduced its target price on Crocs shares from $135 to $99, it maintained a Buy rating. The bank believes the securities are interesting for their recovery potential. Crocs maintains strong fundamentals, and the international business in particular stands out: international revenue grew 16% in the second quarter and BofA estimates it has the potential to continue to post double-digit growth rates. Despite near-term risks, including duties and product mix changes, analysts expect profitability to remain strong due to tight control over promotional activity.

About 53% of analysts, who gave ratings to the company's shares, advise to buy them (Buy and Overweight ratings). Another 41% take a neutral stance, while the remaining one suggests getting rid of Crocs securities. The Wall Street consensus target price is $95.8, which implies a market value increase of nearly 30%.

At the trading on August 8, Crocs shares initially jumped by almost 5% - up to $77.9, but then lost almost all the growth: at the time of publication of this text, the securities were valued by about 1%. A day earlier, after the publication of the quarterly report, they collapsed by 30%. This was their worst single-day collapse since October 2011, noted CNBC. Crocs shares are now 31% cheaper than they were at the start of 2025. By comparison, the main U.S. stock index, the S&P 500, has, by contrast, gained 8.6% over the same period.

For the second quarter of 2025, Crocs reported a net loss of $492.3 million, or $8.82 per share - compared to a profit of $228.9 million ($3.77 per share) in the same period last year. The reason was a $737 million write-down of intangible assets related to the Heydude brand, CNBC noted. However, excluding that write-down and other one-time charges, adjusted earnings came in at $4.23 per share - 22 cents above Wall Street expectations, the channel adds, citing LSEG data. Revenue reached $1.15 billion - 3.4% higher than in the same period a year ago and slightly above analysts' forecasts ($1.14 billion).

However, investors were most disappointed by the vague outlook for the current quarter and the fact that the company refused to provide any guidance for the full year 2025 on revenue and earnings, "given the ongoing uncertainty caused by changing global trade policies and related pressures on consumers". Thus, in the third quarter Crocs forecasts revenue below Wall Street expectations: the company expects a decline of 9-11% year-on-year while analysts, on the contrary, assumed a slight increase. The expected adjusted operating margin for the third quarter, according to the company, is 18-19%, while a year ago it was 25.4%.

In addition, Crocs intends to reduce the volume of orders for the second half of the year amid the deteriorating consumer background, reports CNBC. Most of the company's products are imported from Vietnam, China, Indonesia and Cambodia - now they are subject to high import duties, the channel explains. According to Crocs CEO Andrew Rees, the situation with consumer demand in the U.S. is "alarming" and Americans are becoming increasingly cautious about optional spending, fearing both current inflation and future price increases. "The situation in the second half of the year is a major concern and this is already being reflected in retail orders. We believe now is the time for bold decisions to keep cash flow sustainable," Reece said (quoted by CNBC).

This article was AI-translated and verified by a human editor