Vita Coco Stock Price Prediction

Vita Coco Stock Price Prediction: The Vita Coco Company (NASDAQ:COCO) is a consumer packaged goods (CPG) company that was valued at $832 million in its October 2021 initial public offering (IPO).

Before that, it was called All Market Brands to represent its other drink products. But because Vita Coco owns a 46 percent share of the prolific coconut water market, its brand name carries value.

Despite facing heavy competition from beverage giants PepsiCo (NASDAQ:PEP) and Coca-Cola (NYSE:KO), the company has sustained its growth trajectory. Their corporate brands, O.N.E. and Zico, failed to achieve the same market penetration as this scrappy drink company.

Vita Coco is focused on expanding its portfolio in the healthy drink category. Unlike Vitamin Water, which is reported to be sugary water, coconut water could have real health benefits. But there are disputes over how healthy fruit juices in general are, so how is coconut water different?

Is Coconut Water Good for You?

Coconuts are fruits with a hard shell and liquid center grown in tropical climates. After about a year, the liquid inside begins to form coconut meat, which is a solid white flesh with a unique taste and texture. Coconut water is derived from young coconuts about six months old, and each fruit can produce about a cup of water.

This naturally occurring coconut water is 94 percent water, with a decent concentration of potassium and carbs, along with calcium, magnesium, a phosphorus. It shouldn’t be confused with coconut milk (also sold by Vita Coco, along with Choc-o-lot, and other plant-based energy drinks), which is grated coconut meat mixed with water and contains a high fat content.

Coconut water is an antioxidant and is reported to even help prevent kidney stones. Soda, on the other hand, can cause kidney stones. And it contains naturally occurring electrolytes, which makes it excellent for hydration during high-performance exercise.

The health benefits are just one of the reasons some well-known figures in entertainment have backed Vita Coco.

Vita Coco’s Celebrity Connections

Vita Coco had early seed investments from several celebrities, including musicians Madonna and Anthony Kiedis and actors Demi Moore and Matthew McConaughey.

And it signed entrepreneurial musician Rihanna Fenty as an endorsement partner in the 2010s. She even drank Vita Coco in the official music video for her song “Man Down”.

The video racked up over 830 million views and clearly shows her sipping the branded coconut water through a straw halfway through. Billboards of the imagery were displayed in New York, London, and Los Angeles and helped bring coconut water to the mainstream.

Rohan Oza, a wealthy marketing magnate featured on Shark Tank, is credited with bringing many of these celebrities on. He’s a successful branding expert who also helped make names like Vitamin Water, Bai, and Smartwater recognizable brands.

The company still uses branding partnerships as part of its business strategy. In the last year, it partnered with Nintendo and fashion icon Bretman Rock.

All that success has translated to a balance sheet reflecting $200 million in assets. That’s almost twice the company’s debt level.

The Growth of Vita Coco

There are several key moments in Vita Coco’s history – it was founded by Mike Kirban and Ira Liran, who familiarized themselves with the Brazilian market. Being healthier than soft drinks made it an easy sell to consumers, but it still had to compete with the biggest players in the drink industry.

Because it was smaller and nimbler, Vita Coco was able to outmaneuver larger rivals. The partnership with Oza (who is also an early investor) enabled the company to leverage his existing contacts to put Vita Coco on store shelves fast.

By the time the pandemic hit, it was clear coconut water was more than a trend. In fact, it’s continuing to grow, and the market size has been growing too, reaching an estimated $5 billion. Vita Coco expects to sustainable its growth curve by expanding its portfolio of healthier drinks.

Its 2021 sales are already up 33 percent over the prior year, but its stock price is down 50% from its IPO peak, and that could make it a value for investors.

Vita Coco’s Financial Outlook

Vita Coco’s October 2021 IPO sold 11.5 million shares at $15.00 per share. It’s expected to increase net sales by 20 percent for the fiscal year. Supply chain issued are expected to plague the company through fiscal year 2022. The company’s gross margin is forecast to be slightly lower because of this.

Still, the company has sufficient cash reserves and liquidity to pay to ensure investors need not worry short-term. Indeed management are so confident in the firms free cash flows that they initiated a $50 million buyback at the start of the year.

Although it has a great story thus far, Vita Coco faces higher transportation costs that should lower margins and sits in a crowded market with drink giants, Coca Cola and Pepsi, who have a stranglehold on branding and shelf space, as well as proven operational execution and distribution speed.

Vita Coco Stock Price Prediction: The Bottom Line

Vita Coco is an established player and the largest brand in the coconut water industry. Initially seen as a passing dietary fad, coconut water has proven it has staying power in American grocery stores. The company expanded its brand portfolio to more plant-based drinks in order to ride the wave of health-conscious consumers seeking healthier products.

In retrospect, it appears Vita Coco’s IPO price was price a bit high given that COCO share price is trading much lower. On the other hand, that means Vita Coco is a potential buy for investors seeking an underweight stock that could 10x over the next decade.

How high could Vita Coco stock go? The current price forecast suggest upside to $18 per share, representing a 75% pop from current levels.

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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.