Crocs coming back into style on Wall Street

From fashion, to faux pas, to back in fashion?

Though consumers may not be ready to welcome Crocs' famous rubber clogs back into their closets just yet, both analysts and investors are starting to buy into the idea of an upcoming turnaround for the footwear company. (Tweet This)

Crocs shoes
Source: Crocs

Crocs' shares jumped more than 15 percent after topping analysts' first-quarter earnings forecasts last week, which means they're up more than 20 percent year to date.

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The boost comes as the footwear firm works to fine-tune its business, by focusing more on its well-known—and cheaper to produce—molded shoes, closing unprofitable stores and reaping the potential benefits of its largest-ever marketing campaign.

"Visibility for the turnaround has improved," said Piper Jaffray analyst Erinn Murphy, who upgraded the stock to "overweight" on Thursday, with a price target of $17.

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Regarded by many as a fad brand of the last decade, Crocs' initial public offering in 2006 was the largest in history for a footwear firm. But after its stock hit an all-time high near $75 a share, the company's sales and shares took a tumble. In an effort to regain popularity among consumers, the brand extended its reach beyond clogs and into fashion footwear, including heels and wedges.

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Having since discontinued apparel, accessories and its golf units, Crocs is now transitioning its focus toward its famous molded and casual styles. Sterne Agee CRT analyst Sam Poser said this will lead to less out-of-stock situations as well as help prevent against excess inventory. The company will also start delivering its spring product earlier in warm-weather climates and cut back its store fleet. After closing 114 stores last year, 65 more are on the chopping block for 2015.

"A strong management team with a footwear background is finally in place, the product mix is becoming more focused and compelling, and systems and processes are improving," Poser wrote in a note to investors last week.

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The brand is also stepping up its advertising with the new #Findyourfun campaign, which launched in March.

Still, the company's turnaround comes with challenges. Although Crocs earned 5 cents a share on an adjusted basis in the first quarter, total revenue declined by $50 million, or 16.1 percent. Analysts attributed the drop to a stronger dollar, weakness in China, West Coast port delays and fewer stores.

But despite these headwinds, Poser remains confident in the brand's potential.

"Based on our industry checks, the Crocs brand still holds value, and retailers are going to meaningfully step up their orders on the new product," he said.