Zevia's Struggles With Competition And Execution: Analyst Revises Sales And Profit Estimates Downward

Telsey Advisory Group analyst Dana Telsey downgraded Zevia PBC ZVIA to Market Perform from Outperform, lowering the price target to $4 from $5. 

In the near term, the analyst's visibility on Zevia's sales and profits remains clouded, given a competitive macro environment and several company-specific issues related to operations and execution.

While ZVIA is taking steps to change its supply chain leadership and pausing parts of the transition to restore the service level, the analyst cautions that the company will take more than anticipated costs and time to normalize.

Furthermore, competition is stepping up in energy and carbonated soft drinks, which could present challenges in 2024 and beyond, Telsey adds.

For 2Q23, Telsey forecasts a sales decline of 7.8% to $42 million, down from the prior estimate of $50.6 million, with an adjusted EBITDA of ($4.3 million), down from ($3.5 million) previously. 

For 2023, Telsey estimates total sales growth of 0.8% to $164.5 million, down from the prior estimate of $186.3 million, with an adjusted EBITDA of ($11 million), down from ($9.0 million).

Zevia will report 2Q23 earnings on Tuesday, August 8, 2023.

On the positive side, Zevia is expected to gain market share from its brand refresh initiatives in the summer of 2023, which is likely a 2024 scenario. 

Price Action: ZVIA shares are trading lower by 23.9% to $3.22 on the last check Tuesday.