Multiple Wall Street analysts reduced ratings on Traeger ( NYSE: COOK ) after earnings came in worse than anticipated and full-year sales forecasts were cut significantly.
The Utah-based grill manufacturer posted misses on top and bottom lines for the second quarter, citing macroeconomic pressure for soft sales. Moving forward, management indicated that softness is set to continue. The company now expects revenue to range from $640M to $660M for the full year, well below the expectation of $801.35M.
Following the surprisingly steep cut , analysts were quick to move to the sidelines.
“We are stepping aside on COOK following mixed 2Q results, a larger-than-expected reduction in FY22 guidance, and material lowering of our FY23 EBITDA forecast,” Baird analyst Peter Benedict advised clients. “Management is appropriately taking decisive action to protect liquidity/profitability, and our enthusiasm for the brand's long-term growth opportunity remains intact. However, with the channel inventory recalibration process expected to linger into next year and potential freight-related margin benefits seemingly more a 2H23 dynamic, we believe the stock simply lacks an identifiable catalyst for outperformance over the next several months.”
Alongside a downgrade to Neutral, Benedict trimmed his price target on the stock to $4 from a prior $7.
William Blair analyst Sharon Zackfia was inclined to follow suit, downgrading to a Hold-equivalent as the magnitude of the cut to forecasts proved greater than expectations. She homed in on the inventory issues as particularly problematic for potential upside in the near term.
“While we expect promotional activity to generally right-size retailer inventory by the end of the year, thus setting a cleaner slate for 2023, current sell-through at 2020 levels could set the stage for only flattish to modestly positive revenue growth in 2023 absent an uptick in consumer
Demand,” Zackfia wrote. “As a result, while we remain optimistic on Traeger’s long-term prospects, we see little reason for investor enthusiasm pending an improvement in sell-through trends.”
She added that the current valuation does little to inspire optimism. Further, supply chain “heavily concentrated in China and Vietnam” is a reason for caution on persistent supply chain issues.
Despite the pessimistic reviews, shares of the grillmaker poked into positive territory in afternoon trading. The stock's volatile trading led to a low of $3.61 and a high of $4.30 on the day, a nearly 20% swing.
Read the earnings call transcript .
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Analysts cut ratings on Traeger after downbeat sales forecast