Why Vita Coco Skyrocketed Today
Key Points
Vita Coco crushed first quarter estimates.
The coconut water category appears to be taking off, and Vita Coco is a first-mover here.
The company also got relief on tariffs, lifting margins, which should continue to benefit the company going forward.
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Shares of coconut water category leader Vita Coco (NASDAQ: COCO) skyrocketed 28.1% as of 3:54 p.m. EDT on Wednesday.
Vita Coco was a first mover in the coconut water category, with leading market share. The category appears to be resonating with consumers, as the company delivered a massive earnings beat in the first quarter.
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Viva, Vita Coco!
In the first quarter, Vita Coco delivered 37.4% revenue growth to $179.8 million, while earnings per share grew 61.3% to $0.50. Both figures absolutely trounced analyst expectations. Management also raised its guidance for the rest of the year. It now anticipates sales of $720 million to $735 million, up from a prior range of $680 million to $700 million, and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) between $132 million and $138 million, up from a prior range of $122 million and $128 million.
Co-Founder and Executive Chairman Michael Kirban noted in the press release:
The coconut water category continues to be one of the fastest-growing beverage categories in both the United States and our core international markets, which we believe is due to consumers choosing coconut water for a greater share of their hydration needs. I believe this growth is being largely driven by our investments as the category leader, resulting in increased household penetration and new consumption occasions for coconut water and for the Vita Coco brand. The global momentum in our category and our brand has me very excited for our long-term potential.
Coconut water seems to be transitioning from a novelty to a daily staple for many households. Not only that, but Vita Coco received relief from the higher tariffs it experienced in recent quarters, after the Supreme Court struck down the Trump Administration's country-by-country tariffs in February.
Tariff relief and execution lifted gross margins from 37% a year ago to 40%, fueling the outsize profit growth.
Image source: Getty Images.
Is Vita Coco just getting started?
Niche beverage stocks can make for tremendous stock market winners, as evidenced by the long-term outperformance of Coca-Cola (NYSE: KO) or, more recently, Monster Beverage (NASDAQ: MSTR).
Could Vita Coco become one of these revered beverage brands in the future? First-quarter earnings showed the company on all cylinders, so it's certainly a possibility.
Should you buy stock in Vita Coco right now?
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Billy Duberstein and/or his clients have positions in Vita Coco. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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