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Posted by: Ben Steverman on May 08, 2008
Crocs (CROX), the maker of ugly, comfortable and wildly popular shoes, saw its share price jump 14.5% Thursday after reporting earnings. However, Crocs shares are still 84% off its Oct. 31 high.
It’s a classic tale of stock market hubris, one that has been repeated many times. The stock fell from a high of 74.75 to a low of 9.63 in late April, when it finally was clear to many, many investors that Crocs was another Krispy Kreme (KKD) or Snapple — a fad stock that fizzled.
Some skeptical takes on Crocs are here and here, and a more balanced take from Robert Walberg is here.
To me, Crocs fit the mold of a fad or ‘story stock’ perfectly, as I wrote last November here and here. Yes, Crocs could be — as its supporters insist — the next Nike (NKE). But, as is now clear, it was also the subject of a ridiculous amount of stock market hype. The stock tripled in the first ten months of 2007.
One of the most disturbing things about Crocs’ wild ride has been the lack of skepticism from analysts. Almost all of Crocs’ analysts bought into its growth story and encouraged clients to buy more shares, even after the stock’s collapse in November. Even now, none of Crocs’ nine analysts have a ‘sell’ rating on the stock, and three have a buy (or outperform) rating.
With the stock at such a low level, they might be right. (Thursday’s spike showed the stock still has some buyers.) But these analysts’ track record leaves something to be desired.
Businessweek’s Emily Thornton, Amy Feldman, Ben Levisohn, and Ben Steverman focus on matters great and small for investors, from the views of a hot fund manager to an explanation of the latest products devised by Wall Street’s rocket scientists. Exploring trends in any area, from bonds and stocks to closed-end funds and futures, always with an eye towards giving investors a better understanding of the sometimes confusing and often chaotic world of finance. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.