Crocs Inc. is trading over $70 a share, is it too much?

Crocs, Inc.  (NASDAQ:CROX) has had an amazing run over the last year, since last May the stock has risen 160%. Last week (5/7) Wedbush Morgan upgraded Crocs from "buy" to "strong buy" and set a 12-month target price at $95. Wall Street loves Crocs, they can’t get enough of them, and with the stamp of approval of almost $100 a share, how could it get any better?! On Tuesday they signed a licensing agreement to create new lines of the company’s plastic slip-on shoes and accessories featuring comic book characters published by Marvel Entertainment Inc. (MVL). They’ve made a fortune from their sandals and there appears to be no end in sight, these magical sandals have made this stock a ‘must have’ for investor’s portfolios. So why even question they can do no wrong? It’s hard not to when they have build the company around one product, a sandal. I know they are branching out, they are international, they are this, they are that, but how long can the good times last?

They Cayman slip-on sandal is the life blood of this company, it retails for $29.99 on their website. It’s an amazing shoe, I’ve tried it out and they boast the following about it:
• orthotic foot bed
• advanced toe-box ventilation system
• slip-resistant and non-marking soles
• anti-microbial and odor resistant; ergonomic italian styling
• wide, roomy foot bed made with croslite PCCR material; buoyant
• weighs only ounces

Richard L. Sharp, director of Crocs Inc., sold 100,000 shares of common stock, according to a filing with the SEC last Thursday for $70.25 to $71.13 a piece. Good for him, the guy deserves it, look how much money he’s made for his shareholders in the last year. He’s not the only one cashing in on success, just take a look at the insider transactions in the past 6 months:

Quite a few sales going on wouldn’t you say?

I realize I’m not going to be a popular guy by writing this article, I’ll get emails saying "well, they’re an IPO, this is typical activity", "Why would you talk negatively about a stock everyone loves and is making investors money?"

I’m just trying to get you to think about a few things, such as:

1. Ever consider Crocs sandals could be a fad, in 2009 do you think they will outsell the Rubik’s Cube?

2. Can you convince your loved ones that this stock will continue to grow provided it’s product stream? Would your recommend your parents put part of their retirement savings in Crocs’ company stock?

3. They primarly make their money from sandals, what happens when everyone who wants a pair, buys one — then what? Sure there will be return customers and referrals, but is everyone in America going to wear these things?

I’m not against this stock, I’m not buying puts, and I don’t have a short position. Crocs tells you all about why you "gotta have ’em", I’m just talking about the reasons why you may not "gotta have" the stock.

Frank Lara Jr.

Frank Lara Jr. can be reached at [email protected]; he does not own securities in the companies he covers.