COCO stock ripped higher in morning trade on November 15, 2021, after a flurry of positive analyst actions in the wake of the company’s earnings release.
Evercore starts Vita Coco at Outperform with $18 price target
Evercore ISI analyst Robert Ottenstein initiated coverage of Vita Coco with an Outperform rating and $18 price target. Vita Coco has the potential to grow at twice the rate of the North American non-alcoholic ready-to-drink beverage market as its rides the “two enduring waves” of wellness and the “demographic engine” of Hispanic and Asian-American population growth, Ottenstein tells investors. The company’s understanding of the coconut water category, along with its “irreplicable supply chain,” have allowed it to beat out brands from much larger companies and maintain its commanding market share, while his consumer survey underscores the company’s long-term growth potential, the analyst added.
Credit Suisse bullish on Vita Coco, initiates with an Outperform
As previously reported, Credit Suisse analyst Kaumil Gajrawala initiated coverage of Vita Coco with an Outperform rating and $18 price target. The analyst believes Vita Coco’s position as a niche better-for-you beverage platform offers sufficient top-line strength and bottom-line earnings power to warrant potential valuation upside.
Wells Fargo bullish on Vita Coco, initiates with an Overweight
As previously reported, Wells Fargo analyst Chris Carey initiated coverage of Vita Coco with an Overweight rating and $18 price target. The analyst sees a lot to like about Vita Coco, the leading brand in a fast-growth functional beverage category with distribution runway, competitive moats, a mix margin story, and experienced leadership. Share gains are accelerating behind building strength in both distribution and velocity, Carey adds, arguing that he sees valuation offering appropriate cushion.
Vita Coco initiated with an Outperform at William Blair
William Blair analyst Jon Andersen initiated coverage of Vita Coco with an Outperform rating and no price target. The company participates in the large non-alcoholic beverage market, estimated to be $199B in the United States, Andersen tells investors in a research note. The analyst projects the company will grow sales and EBITDA at compound annual rates of 14% and 20%, respectively, from 2021 to 2023.
Vita Coco initiated with a Buy at BofA
BofA analyst Bryan Spillane initiated coverage of Vita Coco with a Buy rating and $18 price target. The analyst forecasts 16% CAGR over the next three years, with most of the growth coming from distribution gains, product innovation, and new packaging. Spillane adds that Vita Coco’s “robust” supply chain is difficult for competitors to replicate, providing the company with a “differentiated advantage”.
Vita Coco initiated with an Outperform at Credit Suisse
Credit Suisse analyst Kaumil Gajrawala initiated coverage of Vita Coco with an Outperform rating and $18 price target.
Vita Coco initiated with an Overweight at Piper Sandler
Piper Sandler analyst Michael Lavery initiated coverage of Vita Coco with an Overweight rating and $17 price target. The company has had “robust recent growth,” primarily driven by coconut water, a category that has had low double-digit sales growth over the last four quarters, Lavery tells investors in a research note. The analyst says ta Coco has exclusive supply agreements and stable costs for key inputs as well as a “long runway for growth.”
Vita Coco initiated with a Buy at Goldman Sachs
Goldman Sachs analyst Bonnie Herzog initiated coverage of Vita Coco with a Buy rating and $22 price target. The analyst sees the company as an innovator within the consumer packaged goods universe, saying it essentially scaled the coconut water category in the U.S. and has a “rich” pipeline of coconut water products that fuse functional benefits with authentic, better-for-you ingredients. Herzog sees a “long runway of attractive topline growth” for Vita Coco.
The Vita Coco Company Reports Third Quarter 2021 Financial Results
On November 11, 2021, The Vita Coco Company, Inc. (NASDAQ:COCO), a leading high-growth platform of better-for-you beverage brands, announced financial results for the third quarter and first nine months ended September 30, 2021.
Record Third Quarter Net Sales Increased 32.5% to $115.7 Million
Income from Operations Increased 72.7% to $17.8 Million
Third Quarter 2021 Highlights Compared to Prior Year Period
- Net sales grew to $115.7 million, a 32.5% increase
- Gross profit increased to $38.5 million, or 33.3% of net sales
- Income from Operations was up 72.7% to $17.8 million
- GAAP Net income was $13.0 million, or $0.24 per diluted share
- Non-GAAP Adjusted EBITDA1 increased 83.0% to $20.6 million
- First Nine Months 2021 Highlights Compared to Prior Year Period
- Net sales grew to $292.9 million, a 21.5% increase
- Gross profit increased to $91.6 million, or 31.3% of net sales
- Income from Operations was up 10.5% to $29.7 million
- GAAP Net income was $22.4 million, or $0.42 per diluted share
- Non-GAAP Adjusted EBITDA1 increased 21.6% to $36.3 million
- Subsequent Events
Initial public offering (“IPO”) completed in October 2021, with 11.5 million shares sold at $15.00 per share
Michael Kirban, the Company’s co-Chief Executive Officer and Chairman, stated, “I’m extremely proud of our teams’ ability, once again, to deliver incredible results, especially in a challenging environment. I’m most excited about our accelerating leadership position in the high growth Coconut Water category and in our ability to bring new products and brands to consumers who are looking for healthy alternatives to conventional beverages. I want to recognize the effort of all our employees on accomplishing this and achieving a record quarter in net sales. Our top line growth continued to accelerate in the third quarter as compared to the first and second quarters of 2021 despite inventory challenges, with net sales growing 32% compared to the prior year period largely driven by our Americas segment. Looking forward, we plan to continue to prioritize growth by driving the Coconut Water category and meeting the expanding consumer demand for better-for-you natural and plant-based beverages. We believe we are well positioned to leverage our strong foundation and asset lite business model to propel future profitable growth and to meet this growing consumer demand.”
Martin Roper, the Company’s co-Chief Executive Officer, commented, “Our top line growth in the Americas was driven by the strength of our Vita Coco Coconut Water product category, combined with increased net sales from Private Label due to better inventory availability and associated timing of revenue recognition. We also benefited from increased net sales per case equivalents, due to reduced promotional pricing activity within our Vita Coco Coconut Water product category. Our net sales growth was accomplished even with continued inventory constraints on some SKUs related to availability of ocean containers at acceptable prices and increased transit times.”
Roper continued, “Our costs of goods for the quarter continued to be impacted by ocean freight transportation cost increases, which were sequentially worse than in the second quarter. While difficult to predict when the global supply chain will normalize, we believe our costs of goods are likely to remain under pressure for the next several quarters due to inflated freight and transportation costs. In the third quarter, we were able to offset most of these inflationary costs with increased volume and improved price/mix to generate our gross profit and income from operations growth. Our recent IPO solidified our balance sheet and has us well positioned to chase further share gains during these supply chain challenges which we believe will eventually normalize. In anticipation of continued growth, we intend to build our inventories over the winter to support our projected peak summer demand, assuming current year-to-date growth rates are sustained. Our discussions with retailers on increased distribution, new brand innovations and expansion of our Vita Coco coconut milk offering are progressing. Overall, we believe our business is healthy and our commercial platform is in a good position to support our multiple growth initiatives for long-term growth both in our Americas and International segments.”
Third Quarter 2021 Results
Net sales increased $28.3 million, or 32.5%, to $115.7 million for the third quarter ended September 30, 2021, compared to $87.3 million for the third quarter ended September 30, 2020. The increase in net sales was primarily driven by higher case equivalent volumes across both the Americas and International segments, with the Vita Coco Coconut Water product category as the largest contributor to the increase.
Gross profit was $38.5 million for the third quarter of 2021 compared to $29.4 million for the third quarter of 2020. Gross profit margin decreased 36 basis points to 33.3% for the third quarter of 2021 compared to 33.6% in the same period last year. The gross margin erosion in the third quarter of 2021 compared to the prior year period was primarily due to higher ocean freight costs and other logistics costs, partially offset by a reduction in promotional activities. Cost of goods per case equivalent were up 10% for the quarter compared to 8% on a year-to-date basis, primarily driven by continuous rise of ocean freight and logistics costs.
Selling, general and administrative expenses in the third quarter of 2021 were $20.7 million, or 17.9% of net sales, compared to $19.1 million, or 21.8% of net sales, in the prior year period. The increase in expenses was primarily due to the Company incurring costs associated with preparing for being a public company.
Income from operations was up 72.7% to $17.8 million for the third quarter of 2021 compared to $10.3 million for the third quarter of 2020. The increase versus prior year was primarily driven by the increase in gross profit offset by the increase in selling, general and administrative expenses.
Net income attributable to shareholders was $13.0 million, or $0.24 per diluted share, for the third quarter of 2021 compared to net income of $9.0 million, or $0.15 per diluted share, in the prior year period. Third quarter of 2021 included an unrealized non-cash FX loss of $2.0 million related to derivative instruments, compared to an unrealized gain of $0.2 million in the same period last year.
Adjusted EBITDA1 for the third quarter of 2021 was $20.6 million, compared to $11.3 million in the third quarter of 2020. The increase in Adjusted EBITDA was primarily driven by the increase in gross profit.
Americas net sales increased $26.4 million, or 35.4%, to $100.9 million for the third quarter of 2021 compared to $74.5 million in the prior year period. This increase was due to growth in Vita Coco Coconut Water and Private Label. The Vita Coco Coconut Water product category increased $20.9 million, or 41.1%, to $71.8 million for the third quarter of 2021 compared to $50.9 million in the prior year period. This was driven by increased case equivalent volume due to higher consumer demand, and less promotional price activity starting in the second quarter which had a disproportionate impact in the third quarter of 2021. Net sales were the strongest within the Company’s Direct Store Delivery (DSD) channel which services most of the Food, Mass Merchandisers, Drug and Convenience channels. Private Label increased $5.7 million, or 28.4%, to $26.0 million for the third quarter of 2021 compared to $20.2 million in the prior year period, mostly driven by better inventory availabilities and associated timing of revenue recognition.
Americas gross profit was $34.7 million for the third quarter of 2021 compared to $25.1 million for the third quarter of 2020. Gross profit margin increased 69 basis points to 34.4% for the third quarter of 2021 compared to 33.7% in the same period last year driven by a reduction in promotional pricing offsetting the inflationary supply chain costs.
International net sales increased $1.9 million, or 15.1%, to $14.7 million for the third quarter of 2021 compared to $12.8 million in the prior year period. This increase was primarily driven by increased sales in the Company’s European region, which included a favorable impact related to foreign currency translation.
International gross profit was $3.8 million for the third quarter of 2021 compared to $4.3 million for the third quarter of 2020. Gross profit margin decreased 757 basis points to 25.9% for the third quarter of 2021 compared to 33.5% in the same period last year primarily driven by the inflationary supply chain costs, especially on ocean freight shipping to Europe.
As of September 30, 2021, prior to the completion of its initial public offering, the Company had cash and cash equivalents and total debt of $35.9 million and $37.6 million respectively, compared to $72.2 million and $25.1 million respectively as of December 31, 2020. The decrease in net cash was driven by a share buyback of approximately $50 million executed by the Company in the first quarter of 2021 and higher working capital needs, primarily due to increased inventory related to higher net sales, longer ocean transit times and increased cost of goods per unit. Inventories as of September 30, 2021, totaled $47.2 million, compared to $32.0 million as of December 31, 2020.
Initial Public Offering
On October 21, the Company began trading on The Nasdaq Stock Market, under the ticker symbol COCO and closed its IPO of 11,500,000 shares of common stock at a public offering price of $15.00 per share on October 25. The Company sold 2,500,000 shares of common stock and the selling stockholders sold 9,000,000 shares of common stock. The Company did not receive any proceeds from the sale of shares by the selling stockholders. Total net proceeds to the Company were approximately $30 million, net of underwriter’s discounts and commissions and other offering expenses. The Company used the net proceeds from the IPO to repay outstanding borrowings under its Term Loan Facility and for general corporate purposes, including working capital and operating expenses. After September 30, 2021, subsequent to the IPO, there were 55,509,320 shares of common stock outstanding.
Fiscal Year 2021 Full Year Outlook
- The Company expects net sales percentage growth for fiscal year 2021 of 19-21% compared to fiscal year 2020.
- The Company expects gross margin for fiscal year 2021 to be slightly lower than its year-to-date average due to the worsening global and domestic transportation cost environment and the limited ability of the Company to offset these incremental costs with promotional pricing reductions during the fourth quarter.
- The Company expects supply chain disruptions to persist through most of fiscal year 2022 and is managing its supply capabilities to support the current year-to-date growth rate continuing through 2022.
- The Company does not anticipate any material changes to its current share count by end of fiscal year 2021 which assumes no share repurchases or significant exercises of stock options or issuances of restricted stock in the fourth quarter 2021.
COCO stock technical analysis
The short term trend is positive, while the long term trend is still negative. So this is evolving in the right direction, but it may need some more time to really turn around the trend. The rising large players volume and money flow looks good. COCO stock hasn’t been trading long enough to establish a technical rating but the stock does not present a quality setup at the moment. Price movement has been a little bit too volatile to find a nice entry and exit point. It is probably a good idea to wait for a consolidation first. Click here to sign up for email alerts on when COCO stock is a good entry.