Is Traeger Stock A Buy?

Traeger Inc (NYSE:COOK) disrupted the age-old outdoor cooking industry with its wood-pellet grills. They are versatile, easy-to-use, and even internet-connected. Those ingredients combined helped the Salt Lake City-based company capture three percent of the U.S. grill market and grow to over a $2.5 billion market cap.

With the grill market valued at $6.1 billion in the past year, is Traeger stock a buy?

The company’s specialization is perfectly aligned with current grilling trends. Cooking on real wood brings a unique and unmatched flavor to meats and vegetables.

Brand loyalty is strong, and Traeger is helping to make barbecuing more accessible, even during the winter months, when cooking outside traditionally slows down.

With a strong social media presence, including around 500,000 Facebook followers and 150,000 YouTube subscribers, Traeger is impressing a hard-to-please fanbase ranging from professional chefs to hobbyist pit masters.

We fire up the grill on Traeger to see if it will heat up investor returns or leave portfolios up in flames.

Traeger Special Sauce Is Grill Design

Traeger is an American wood-pellet grill company founded in 1985. It sells a variety of pellet grills, smokers, accessories, and consumables. Its products are the top-selling wood-fired grills; Traeger eschews gas and charcoal fuel for wood pellets.

Instead of cooking directly over the heat source, Traeger grills use a fan and auger to circulate heat and dial in the temperature to a more precise level. This design ensures a consistent heat for both barbecuing and smoking.

Fans say the flavor from wood pellets can’t be matched with gas or charcoal grilling – without adding an extra step of smoking with wood chips before grilling. Besides being easy to use, Traeger grills can also be controlled via a smartphone app.

This is the foundation for a vertically integrated cooking platform that recently expanded through its July acquisition of Apption Labs, maker of the Meater smart meat thermometer.

How Big Is The Market Opportunity? 

Summertime barbecues are iconic Americana. This passion and tradition fuels a $6.1 billion industry projected to grow to $8.1 billion over the next two years. The U.S. grilling industry accounts for $2.75 billion of that total. Gas and charcoal grills are the most popular grill types at a combined 90 percent of the market.

This leaves only 10 percent for all other grill types, and three percent are wood pellet grills. But that’s continuing to grow as market tastes change.

It’s estimated by the Hearth, Patio, and Barbecue Association (HPBA) that 64 percent of U.S. adults own a grill or smoker, with 63 percent of those owners using them year-round.

Most of these grills (83 percent) are bought in-store, with only 15 percent purchased online. As a result, e-commerce less important in the industry, even though Traeger’s digital presence is important. But is it enough to convince investors to buy in?

Is Cook Stock A Buy?

Traeger is largely rated by analysts as a buy, especially at a price below $30.00. The company’s guidance for the year is for revenue of $760 million to $770 million with around a $105 million EBITDA.

The company’s most recent quarter showed total revenue increasing by 39.1 percent, with grills bringing in $156.1 million, while consumables and accessories brought in $56.9 million. Profit margins decreased due to shipping costs and currency.

It also holds $75.3 million in cash and equivalents, which includes a refinance on the debt it used to acquire Apption Labs.

Not least because of its relatively low P/E ratio, Traeger stock could be a great buy and hold for at least the next two years as the market continues its growth trajectory. Of course, just because the market is growing doesn’t mean that Traeger will grow with it. There’s still plenty of competition in the game.

Traeger Competitors and Partners

Traeger grills are available on the company’s website, but they’re also sold in a variety of authorized retailers, including Ace Hardware, Amazon (NASDAQ:AMZN), Bass Pro, Best Buy (NYSE:BBY), and Cabela’s.

The company also recruited famed pit master and Meat Church BBQ founder Matt Pittman to promote COOK grills with a variety of recipes and appearances.

It’s a strong team, but the company is still a relatively small player in the overall BBQ industry. And there are even competitors in its niche of wood-pellet grills, like Rec-Tec and Z Grills. The Rec-Tec Bull RT-700 is rated as comparable to Traeger’s popular IronWood, which is its mid-tier offering.

Although Traeger’s grills are largely rated positively by critics and fans alike, there are still risks to investors jumping on board this decades-old company.

Is Traeger The Peloton Of Grilling?

Traeger isn’t the only barbecue grill company that went public in 2021 – Weber (NYSE:WEBR) is a charcoal, gas, and electric competitor that’s about twice as large. The difference between the two companies is that Traeger aims to be the Peloton (NASDAQ:PTON) of grilling.

It sells higher-end (read “more expensive”) grills, which is both a good and a bad thing. While the grilling market may expand, its position could shrink if the economy turns a direction where purses are tightened.

Traeger technology is viewed as solid, but the market sentiment could change in a weaker economy to the point where people can’t afford a premium grill and premium wood pellets.

Outside of its community of fervent userbase, Traeger still doesn’t have the brand name recognition of a Weber or Char-Broil. This could limit growth potential.

Is Traeger Stock A Buy? The Bottom Line

Traeger is a premier wood-pellet grill company that has been on a growth trajectory since its August 2021 IPO. It attributes this growth to changing cooking patterns, which forced people to stay home and grill outdoors more.

The economic future is hazy and it’s unclear if this growth will continue beyond 2023. Investors have a relatively stable short term to look forward to but a more cloudy long-term forecast.

If you love barbecue, the company’s grills are a must-have according to loyal customers. However, COOK stock may be less palatable for value investors due to potentially limited long-term returns.

A discounted cash flow forecast analysis pegs the upside for Traeger at a whopping 105% at the time of research with a target share price of $28.22.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.