Coconut product company Vita Coco's excessive stock decline, driven by tariff issues, is potentially exaggerated, according to Piper Sandler, considering available countermeasures.
In the second quarter of 2025, Vita Coco, a leading coconut water brand, reported revenue of $169 million, surpassing expectations by $7.44 million. The company's earnings per share (EPS) for the same period also beat expectations, with a GAAP EPS of $0.38, a $0.03 difference from analysts' projections.
However, the trade situation uncertainty continues to loom over the company, with revised tariffs affecting Vita Coco's shares. According to Piper Sandler, the potential weighted average tariff for Vita Coco could be around 21%, adding approximately 6% of incremental costs in 2026.
To manage these increased costs, Vita Coco is employing tariff mitigation strategies, including inventory optimization, pricing adjustments, and retail demand growth. Analysts suggest that the company can implement commensurate price increases starting early 2026 to offset the expected 6% incremental tariff cost.
The company's shares perked up after the close on Tuesday, and Vita Coco (NASDAQ: COCO) shares are nearly 4% higher in after-hours trading. Lavery and Maloney, analysts at Piper Sandler, have set a price target of $39 for Vita Coco, representing a 15% upside from Tuesday's closing price. They have also upgraded Vita Coco to Overweight from Neutral.
Piper Sandler believes the recent pullback in Vita Coco's stock was overdone. The analysts also believe the company has "sourcing flexibility" to mitigate any negative impacts from revised tariffs. For instance, Vita Coco sources coconuts primarily from Southeast Asian, Central, and South American countries. The company can shift its highest tariff product from Brazil (50% tariff) to non-U.S. markets, which are 17% of COCO's total volume. The company could potentially fill the gap within 4-6 months by sourcing from the Philippines, which has a 19% tariff.
Vita Coco's full year 2025 guidance reflects tariff impacts and mitigation plans, but excludes potential additional tariffs not yet implemented. Forecasted net sales are between $565 million and $580 million, with continued coconut water category growth in the high teens percentage range. The share repurchase program and enhanced retail partnerships also support financial resilience amid tariff challenges.
In summary, tariff mitigation chiefly involves price adjustments and inventory management, which are expected to partly offset cost increases by 2026, helping to stabilize Vita Coco's cost structure and financial outlook in a tariff-influenced environment. These strategies have supported revenue growth and improved inventory positions, especially through increased investments in international markets like the UK and Germany.
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