HONOLULU, UNITED STATES – 2020/03/05: A customer walks into an american foam clog shoes company … [+]
SOPA Images/LightRocket via Getty Images
Comparing the trend in Crocs’ (NASDAQ: CROX) stock over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock can potentially rise 70% to regain its $39 level once fears surrounding the coronavirus outbreak subside. Our conclusion is based on our detailed comparison of Crocs’ performance vis-à-vis the S&P 500 in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did Crocs Stock Fare Compare With S&P 500?
The World Health Organization declared a global health emergency at the end of January in light of the coronavirus spread. Between February 19th and April 20th, Crocs stock has lost nearly 41% of its value (vs. a 17% decline in the S&P 500). A bulk of the decline came after March 6th, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Matters were only made worse by fears of a price war in the oil industry triggered by an increase in oil production by Saudi Arabia.
Crocs’ Stock Has Fallen Because The Situation On The Ground Has Changed
The decline in Crocs’ stock is understandable, considering the impact that the outbreak and a broader economic slowdown are likely to have on total consumption/consumer spending and the global apparel industry. Notably, Crocs derives a bulk of its revenues from the US, which has become the new epicenter of the outbreak – recording the largest numbers of COVID-19 cases across the globe. Moreover, people are just not going to shop for luxury or even basic apparel products. Additionally, Crocs has temporarily shuttered stores in North America and Europe, which is further impacting the company’s performance. The company also withdrew its earnings guidance provided after the release of its Q4 results (ending December), as it expects store closures and the impact of COVID-19 to have a material adverse impact on financial results.
But Crocs Stock Witnessed Something Far Worse During The 2008 Downturn
- We see Crocs stock declined from levels of around $67 in October 2007 (the pre-crisis peak) to levels of around $1 in March 2009 as the company nearly went bankrupt. This implies that the company’s stock lost as much as 98% from its approximate pre-crisis peak – a steeper drop than the broader S&P, which fell by about 51%.
- Despite this, the stock recovered strongly once the recession passed – rising by 371% between March 2009 and January 2010. In comparison, the S&P rose by about 48% over the same period.
Will Crocs’ Stock Recover Similarly From The Current Crisis?
Keeping in mind the fact that Crocs stock has fallen by 41% this time around compared to the 98% decline during the 2008 recession, we can expect it to recover to the $39-level it was at before the coronavirus outbreak gained global momentum.
That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.
Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture. It complements our analyses of the coronavirus outbreak’s impact on a diverse set of Crocs’ multinational peers – including Nike, L Brands, and Urban Outfitters. The complete set of coronavirus impact and timing analyses is available here.