Hot Stocks: Kate Spade, Skechers, Crocs

There is an extensive and diverse list of reasons for buying a stock. Often, market watchers encourage investors to purchase shares in top-performing companies with strong brand momentum, solid management and high profitability (think Apple Inc. and Skeckers USA Inc.).

Other times, insiders advise to “buy on weakness” — purchase the stock of a company that is, for instance, seeing a lull in profitability but has new management or a rebound strategy for a major comeback.

Whatever the rationale, there are several footwear stocks that analysts have been bullish about over the last few weeks.

Read on for three stocks analysts say are worth investing in.

Crocs Inc.
The Niwot, Colo.-based company’s shares surged over 6 percent last week after the firm announced key executive changes and a net loss — which was less than some analysts had predicted — in Q1.

In their reports following the earnings release, CL King analyst Steven Marotta, Sterne Agee analyst Sam Poser and Wunderlich Securities Inc. analyst Danielle McCoy all reiterated a “buy” rating for the stock.

“We feel analysts should focus more on Crocs’ ultimate earnings power than its current earnings run rate,” said Marotta in a note. “We expect FY15 to be a transition year, with a focus on potential profitability instead of sales growth.”

On May 8, the company announced that it had eliminated the COO role — most recently held by Scott Crutchfield — as well as the SVP of global supply chain. It added an SVP of global sourcing, Phil Blake, and promoted Dennis Sheldon to SVP of global distribution and logistics.

“A strong management team with a footwear background is finally in place,” said Poser of the executive shakeup. “The product mix is becoming more focused and compelling, and systems and processes are improving.”

In other words, the time to buy is now.

Kate Spade & Co.
After swinging to a net loss of $55.2 million in Q1, Kate Spade’s shares plummeted over 10 percent on May 7. To the untrained eye, such a tumble might signal a need to run in the opposite direction, but industry insiders have overwhelmingly reiterated a “buy” rating for the stock, adding that the shares might be even more attractive after the tumble.

“We would buy on weakness, as we believe Q1 saw the most challenging compares,” wrote Citi Research analyst Kate McShane in a note. “Kate will continue to benefit from the China joint venture, licensing agreements and associate-training initiatives.”

On May 7, the footwear, apparel and accessories company also announced plans for expansion into Latin America via a new distribution agreement with Exclusive Brands International S.A. (EBI).

Analysts spoke positively of the brand’s international exposure, adding that its strong global appeal — buoyed by new and existing partnerships — make the stock a decent buy.

“Buy Kate on pullback,” wrote Cowen & Co. analyst Oliver Chen. “[It is] a credible global lifestyle brand in great categories…. We view Kate as among best-in-class in terms of consistently portraying their brand across channels.”

Skechers USA Inc.
Here’s an example of a top-performing company getting “buy” ratings across the board. While much of this goes without saying, robust brand momentum, diverse product offerings, geographic strategy and high order backlog (up 50 percent) are driving analysts’ bullish positions on the firm.

“Skechers’ overall strength across major footwear categories continued to support our thesis that the brand’s long-term growth will be sustained by a more diversified product model,” wrote Citi Research analyst Corinna Van der Ghinst in a note, reiterating a “buy” rating for the stock.

Poser also reiterated his “buy” rating for the Manhattan Beach, Calif.-based company and assured investors who might still remember the company’s decline in 2010 and 2011 that the current high is expected to last.

“We recognize that some investors still think back on the woes of 2010 and 2011, but things have changed,” Poser wrote. “Skechers has levered its expenses for eight of the last nine quarters … gross margin has increased for the last eight of the last nine quarters.… We expect operating margin to get very close to 11 percent in 2015, and 10 percent net income margin should be achieved by 2017.”

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