What Happened:
Shares of coconut water company The Vita Coco Company (NASDAQ:COCO) fell 5.6% in the morning session after Piper Sandler analyst downgraded the stock's rating from Overweight (Buy) to Neutral. The major factor in the downgrade is expectations of rising shipping costs, which might eat into margins. This echoed the cautious guidance shared by the company during the last earnings call with management, adding, "Q1 was abnormally high with a combination of low ocean freight, no impact yet, higher branded pricing. So we will see that start to step back in the quarter with the highest ocean freight in the quarter, but the kind of detail quarter-to-quarter is harder to call."
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What is the market telling us:
Vita Coco's shares are somewhat volatile and over the last year have had 15 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago, when the stock gained 16.5% on the news that the company reported fourth-quarter results that blew past analysts' EPS expectations. Its revenue also outperformed Wall Street's estimates. On the other hand, its full-year revenue guidance was underwhelming. However, adjusted EBITDA guidance came in ahead, which minimized the impact of the below-Consensus revenue guidance. Overall, we think this was a strong quarter that should satisfy shareholders.
Vita Coco is up 10.1% since the beginning of the year, but at $28.86 per share it is still trading 9.3% below its 52-week high of $31.83 from September 2023. Investors who bought $1,000 worth of Vita Coco's shares at the IPO in October 2021 would now be looking at an investment worth $2,132.
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