Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of shoe manufacturer Crocs (NAS: CROX) were getting chewed up and spit out by the market today, falling as much as 39% in intraday trading after lowering third-quarter guidance.
So what: Crocs issued a press release saying that it is "revising" its third-quarter expectations. That, of course, means that the numbers will be disappointing. (Most companies say "raising" when they are raising, but prefer words like "revising" or "adjusting" when lowering.)
For the quarter, the company now expects revenue between $273 million and $275 million, which is an increase over the $216 million it reported last year, but below the $280 million it had previously projected. Lower margins helped pull down earnings per share even more. They're now expected to clock in between $0.31 and $0.33 versus a prior view of $0.40.
Now what: At the midpoint of the new EPS guidance range, Crocs is bringing third-quarter numbers down by 20%. At the midpoint of the new revenue range, the company will take in $6 million less on the top line. In light of that, does the near-40% drubbing of the stock that's bitten off more than $900 million in market value seem like an overreaction? I'd have to say yes.
But the more important question is whether that suddenly makes Crocs stock an opportunity. For those interested primarily in short time horizons, the answer could be yes since there's the possibility of a bounce-back when emotions cool. For longer-term investors, the question boils down to whether Crocs is a company you believe in and want to be an owner of. For this Fool, that answer is still no.
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