Traeger, Inc Plunges On Uncertain Outlook
The market had high hopes for Traeger, Inc (NYSE: COOK) and its unique brand of grilling equipment and supplies, and that may be where the problem lay. When the market’s expectations were as high as they were in this case, there is almost no way for the company in question to meet those expectations, and share prices suffer. In this case, not only has the business been weaker than expected but the latest guidance cast a pall on the market that may keep price action in the gutter for quite some time.
The analysts are still holding the stock but their sentiment is being sorely tested. So far, 6 of the 10 analysts covering the stock have come out with commentary in the wake of the Q4 earnings report and none of it is good. Of the 6, all include a price target reduction and 2 include rating downgrades that have the Pricetargets.com consensus rating a weak Buy with a price target of $14.83. The $14.83 target is 100% above the new low in price action but don’t get too excited about it. The high price target of $27 was set way back in November of 2021 and the 6 new targets are nowhere near that level. Those targets range from $7.00 to $16.60 with most in the $7 to $10 range which suggest the stock is fairly valued with 20% to 30% of upside. The catch is that, if there is no improvement in business or outlook, sentiment will surely fall again.
"Declining grill revenue in combination with supply chain/logistics related margin pressure weigh heavily on profitability and change the leverage profile adding risk to the equity," said analyst Jim Duffy at Stifel.
Traeger, Inc Falls On Strong Results
Traeger, Inc had a good quarter but we have another situation in which rising prices are offsetting a decline in volume and that is not good for business. While revenue is growing above consensus in the near term, the long-term outlook suggests consumers are less enthusiastic and pricing power may be diminishing. In that scenario, margins will come under pressure as they already have and the company is already struggling with profitability. The $174.93 million in revenue is up 30.8% from last year and beat the consensus by 1156 basis points with strength centered in the accessories category. Grill sales grew by 9.3%, consumables fell by almost 20%, and accessories grew by 425% but we aren’t overly excited by that. Accessories sales typically trail the sale of grills and grill sales growth is in clear decline.
Moving down to the income, the company reported an 80 basis point contraction in gross margin and an increase in operating costs and SG&A expense. These increases widened the net loss to $0.29 per share but are mitigated by the adjusted earnings. When adjusted for one-off factors and share-based compensation the company’s earnings come in at $0.03 and a full nickel better than expected but that’s where the good news ends. The company is forecasting a slowdown in sales and earnings in the coming year due to tough comps, supply chain headwinds, and inflationary pressures.
The Technical Outlook: Traeger, Inc Falls To New Low
Price action in Traeger, Inc fell to a new low in the wake of the earnings report and may continue to fall. There are some bottom-fishers buying the stock now but we don’t see any catalysts to drive price action short of results that are many months away. Assuming the analysts continue to downgrade their sentiment, we see this stock edging lower and possibly moving down into the $5.00 range.
Companies in This Article:
