Vita Coco Expected To See Gross Margin Expansion In FY23 Amid Moderating Freight Costs, Forecasts Analyst

Stephens & Co analyst Jim Salera initiated coverage on The Vita Coco Co Inc COCO at Equal-Weight with a price target of $30. 

The analyst is bullish on COCO's leadership in the fast-growing coconut water category, with the wide range of use of coconut water making it easy to penetrate households. 

Related: Vita Coco Launches 'Coconut Milk' Barista MLK, Exclusively With Alfred Coffee

Salera also applauds COCO's asset-light and hard-to-replicate global supply chain, that well positions it to meet growing demand. 

The analyst sees moderating ocean freight costs, which significantly increased during the onset of the pandemic and expects a ~900 bps gross margin expansion in FY23. 

Salera estimates FY23 sales of $477.9 million (consensus: $478.1 million), adjusted EBITDA of $56.1 million (consensus: $56.2 million), and EPS of $0.65.

For FY24, the analyst expects sales of $532.0 million (consensus: $532.9 million), adjusted EBITDA of $73.1 million (consensus: $73.5 million), and EPS of $0.82.

Price Action: COCO shares are trading lower by 1.99% at $28.57 on the last check Friday.