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Moat Mind's avatar

Nice summary. I think the bull case should include more growth coming from international expansion and turn around of HeyDude.

By the way, here is my deep dive on the stock:

https://www.moatmind.com/p/crocs-inc-stepping-boldly-into-the

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Luke B's avatar

Thanks for the write up. Just want to note that your bear, base, and bull cases do not account for buybacks. Continuing their current rate of buybacks ($1.3 billion authorized, 600k shares last quarter) over the decade has a dramatic effect on the share price.

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Kostadin Ristovski, ACCA's avatar

I don't do that for two reasons:

1. Not only are buybacks uncertain, but the price at which they happen is also not known.

2. When that happens, the cash balance decreases. So the impact of not taking buybacks into account isn't that significant.

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John Doe's avatar

Bull case is actually higher margins, MSD growth, and a 15-20x FCF EV multiple IMO

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Kostadin Ristovski, ACCA's avatar

The FCF multiple isn't that far from what you've mentioned.

However, I struggle to find a scenario where margins are much higher. What would drive that?

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John Doe's avatar

Their COGs base vs other shoes is lower. Tariffs impact is lower than competitors since it's a % of COGs base ( $1 x 1.25 = 1.25 resulting in net change 0.25. vs $2 x 1.25 is 2.5 so 0.5 net change. If crox can increase 0.5 with the rest of shoes then $crox actually can get higher margin per clog.

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Kostadin Ristovski, ACCA's avatar

Yes, their COGS vs. the competitors is lower. But, at the same time, if the cost goes up due to tariffs, it is likely that many consumers will defer their purchase, reducing the quantities of products sold.

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