Crocs Stock Gets Upgraded at Pivotal Research

Crocs remains an ideal target for contrarian bulls

Jul 25, 2018 at 9:55 AM
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We've been keeping a close eye on Crocs, Inc. (NASDAQ:CROX), since the stock continues to rally despite little fanfare from Wall Street -- making it an ideal candidate for contrarian traders. However, CROX shares were just upgraded to "buy" from "hold" at Pivotal Research, alongside a price-target lift to $21 from $15. In the bull note, the brokerage firm cited strong summer sales driven by warmer weather, adding that "3Q sets up well for the company." As such, the security has popped 4.2% out of the gate to trade at $17.84.

The move puts Crocs stock back above the previously supportive 50-day moving average, and brings its 12-month advance to 127%. Considering this, the ratings out of analysts -- now five "holds" or "strong sells" versus just one "buy" or "strong buy" ratings -- don't seem to mesh with the equity's technical performance, suggesting additional upgrades are a strong possibility. This discrepancy is further illustrated by CROX's average 12-month price target from the brokerage community, which sits down at $16.17.

Meanwhile, short interest just keeps rising on Crocs, though it's obviously had little impact on the stock price. In just the last two reporting periods, short interest increased 28%, and now makes up over 13% of the float. The 9.1 million shares sold short represent the most in roughly two-and-a-half years, and they'd take almost two weeks to buy back, based on average daily volumes. As such, a short squeeze could also provide tailwinds for CROX.

While options activity overall has been relatively muted on the security, at least a few options traders may be betting on a breakout. During the past 10 days, the August 18 call saw the largest increase in open interest, and the out-of-the-money August 20 call saw heavy attention, as well.

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