Vita Coco: Hydrating Investors with Impressive Growth Prospects

10 нояб.

◉ Abstract

The US coconut water market, projected to grow at 18.10% CAGR to $5.12 billion by 2029 from $1.89 billion in 2023, presents significant opportunities. Vita Coco, the market leader, demonstrates resilience amidst supply chain challenges. Notably, industry giants Coca-Cola and PepsiCo, which previously ventured into this space with ZICO and O.N.E., respectively, have since divested their interests, validating Vita Coco's competitive advantage. With a debt-free balance sheet, 15% revenue growth in FY2023, and expanding EBITDA margins, its fundamentals remain strong. This robust growth trajectory, combined with a solid financial foundation, positions the company as an attractive investment opportunity, offering potential for long-term value creation and substantial returns. Investors seeking exposure to the burgeoning natural and organic beverages market may find this growth story compelling.

Read full analysis here………..

◉ Introduction

The coconut water beverage market in the United States is experiencing significant growth, driven by increasing health consciousness among consumers and a rising demand for natural and organic beverages. Here are the key insights into the current state and future projections of this market.

◉ Current Market Size and Growth Rate

The U.S. coconut water market was valued at USD 1.89 billion in 2023 and is projected to reach USD 5.12 billion by 2029, growing at a CAGR of 18.10% during this period.

◉ Key Growth Drivers
● Health Consciousness: Increasing consumer preference for natural, low-calorie beverages that offer hydration and essential electrolytes.
● Rising Demand for Functional Beverages: Coconut water is popular among athletes and health enthusiasts for its functional benefits, such as electrolyte replenishment.
● Growth of Organic Products: Rising demand for organic coconut water as consumers seek clean-label products free from additives.
● Innovative Product Offerings: Introduction of flavoured coconut water and convenient packaging options, such as cans, enhances appeal and accessibility.
● Increased Availability and Distribution: Wider retail presence in supermarkets, health food stores, and online platforms boosts market accessibility.
● Cultural Acceptance: Traditional significance of coconut water in regions where coconuts are common supports its global popularity.
● Sustainability Trends: Eco-friendly packaging and sustainable sourcing practices attract environmentally conscious consumers.

◉ Major Players in the US Coconut Water Industry

1. Vita Coco
● Market Position: Vita Coco is one of the leading brands in the coconut water segment, known for its wide range of flavours and strong brand recognition.
● Product Offerings: Offers plain and flavoured coconut water in various sizes.
● Market Share: Holds a substantial portion of the market, often cited as the top player.

2. Coca-Cola Company (ZICO)
● Market Position: Previously owned ZICO, a well-known coconut water brand, which Coca-Cola acquired in 2012 but later discontinued in 2020.
● Current Status: While ZICO is no longer on the market, Coca-Cola remains a significant player through its other beverage offerings.

3. PepsiCo (O.N.E.)
● Market Position: PepsiCo's O.N.E. brand was a notable competitor in the coconut water space until its divestment in 2021.
● Current Status: PepsiCo has shifted focus away from this segment but retains influence through its broader beverage portfolio.

4. C2O Pure Coconut Water
● Market Position: C2O is recognized for its pure coconut water sourced from Thailand, emphasizing quality and natural ingredients.
● Market Share: It holds a significant share among niche brands.

5. Taste Nirvana
● Market Position: Specializes in high-quality coconut water sourced from Thailand, focusing on authentic taste and premium offerings.
● Product Range: Includes both plain and flavoured varieties.

6. Amy & Brian Naturals
● Market Position: Offers 100% natural coconut water with no additives, appealing to health-conscious consumers.
● Distribution: Available through various retail channels, including health food stores.

7. Other Notable Brands
● Additional brands such as Raw C, Bai, and Harmless Harvest also contribute to the market's competitive landscape, offering unique products that cater to different consumer preferences.

In an industry poised for robust growth, we will conduct an in-depth examination of Vita Coco's technical and fundamental aspects.

◉ Company Overview
The Vita Coco Company Inc. COCO is a leading developer, marketer, and distributor of coconut water products and other beverages. Its portfolio includes Vita Coco coconut water, coconut oil, and coconut milk, as well as Runa plant-based energy drinks, Ever & Ever packaged water, and PWR LIFT protein-infused fitness drinks. The company also offers private label coconut water and oil solutions for retailers. With a global presence spanning the United States, Canada, Europe, Middle East, Africa, and Asia Pacific, Vita Coco's products are available through various channels, including club stores, food and drug retailers, convenience stores, e-commerce platforms, and foodservice providers. Founded in 2004 and headquartered in New York, New York, the company formerly operated as All Market Inc. before adopting its current name in September 2021.

◉ Investment Advice
💡 Buy The Vita Coco Company COCO
● Buy Range - 30.3 - 31.3
● Sell Target - 43 - 44
● Potential Return - 37% - 40%
● Approx Holding Period - 12-14 months

◉ Market Capitalization - $2.01 B

◉ Technical Analysis

● Weekly Chart
➖ Since its debut in 2021, the stock has undergone a prolonged consolidation phase, during which it developed a Rounding Bottom pattern.
➖ Following the breakout, the stock price surged initially but quickly transitioned into another consolidation phase, forming a Symmetrical Triangle pattern.
➖ Recently, a strong breakout has set the stage for considerable upward momentum.

● Daily Chart
➖ On the daily chart, an Inverted Head & Shoulders pattern is clearly visible.
➖ After a recent breakout, the stock price is now aiming for new highs.

◉ Relative Strength

The stock's performance over the past year has not matched up to the Nasdaq index, achieving a modest return of 22.5%, in contrast to the Nasdaq's impressive 40% return.

◉ Location Wise Revenue Breakdown

Total Revenue in 2023: $494 million

● Americas Segment:
➖ Total Revenue from Americas: Approximately $424 million.
➖ Revenue from the United States: Around $401.97 million, reflecting substantial growth from $352.73 million in the previous year.

● International Segment:
➖ Total Revenue from International: Approximately $70 million, indicating a smaller contribution compared to the Americas.

◉ Revenue and Profit Analysis

● Year-over-Year

➖ For the fiscal year 2023, the company reported a revenue of $493.6 million, marking a 15% increase from the $427.8 million recorded in fiscal year 2022.
➖ The EBITDA for FY23 also saw a remarkable rise, reaching $57.5 million, a significant jump from just $12.3 million in FY22.
➖ Additionally, the EBITDA margin expanded to 11.6%, up from a mere 2.9% during the same timeframe.

● Quarter-over-Quarter

➖ In the most recent quarter ending in September, revenue fell to $133 million, down from $144 million in June 2024. This figure also represents a decline from $138 million in the same quarter last year.
➖ The EBITDA for this latest quarter was $20.8 million, a decrease from $30.2 million in June 2024.
➖ In September, the diluted EPS experienced a modest rise, increasing to $1 (LTM) from $0.94 (LTM) in June 2024.

◉ Valuation

1. P/E Ratio
● Current P/E vs. Peer Average P/E

➖ When examining the P/E ratio, COCO is at 33.9x, which suggests a considerable overvaluation compared to the peer average of 22.4x.

● Current P/E vs. Industry Average P/E

➖ In the context of the Global Beverage industry, COCO's P/E ratio of 33.7x is significantly higher than the industry average of 18.8x, indicating that it is relatively expensive.

2. P/B Ratio
● Current P/B vs. Peer Average P/B

➖ Looking at the P/B ratio, COCO's current value of 8x is lower than the average of its peers, which stands at 10.5x, suggesting a relative undervaluation.

● Current P/B vs. Industry Average P/B

➖ In comparison to the industry average, COCO's P/B ratio of 8x indicates a significant overvaluation, as the industry average is only 5.1x.

3. PEG Ratio
➖ A PEG ratio of 0.6 suggests that the stock is undervalued relative to its expected earnings growth.

◉ Cash Flow Analysis
➖ In fiscal year 2023, operational cash flow experienced remarkable growth, reaching $107 million, a substantial increase from only just $11 million in fiscal year 2022.

◉ Debt Analysis

➖ The company proudly maintains a completely debt-free status, showcasing its strong financial health.

◉ Earnings per Share (EPS) Growth Forecasts

➖ Experts forecast that the earnings per share (EPS) could increase from $1 to $1.09 by December 2025, and further rise to $1.3 by December 2026.

◉ Top Shareholders

➖ Blackrock has significantly increased its investment in this stock, now holding an impressive 5.55% stake, which marks a 7.4% rise since the end of the June quarter.
➖ On the other hand, The Vanguard Group has a stake of approximately 4.31% in the company, representing a 3% rise from the June quarter.

◉ Conclusion
The coconut water market is booming due to health trends, functional beverage demand, innovation, and wider availability. Vita Coco, despite Q3 supply chain woes, is optimistic about the future and is investing in inventory and production capacity. Despite overvaluation, the company's growth potential is significant, driven by the rising demand for organic products.