COOK - stevehemingway/trading GitHub Wiki
tags: [potential/short, analyst/overlooked-alpha, analyst/vince-martin] ...
Manufacturer of very expensive, high-tech BBQs which burn hardwood pellets, recent IPO.
8 hr ago
-
A brutal 2022 in the wake of pandemic-driven growth has sent COOK down 66% year-to-date.
-
Yet, from a fundamental perspective there’s room for more downside.
-
A leveraged balance sheet leaves no room for error, and has forced near-term choices that will have long-term effects.
-
A buyout offer at a rival catalyzed a 52% rally; another ugly quarter should set that rally in reverse.
Traeger COOK 2.00%↑ is in trouble. The question is if that broad fact is enough to short Traeger stock.
There’s a reasonable argument to avoid a short here. The challenges facing the manufacturer of wood pellet grills are hardly hidden. COOK is down by two-thirds so far this year. It’s fallen 77% from the $18 price of its initial public offering in July of last year, and 87% from all-time highs reached soon after.
[
Meanwhile, an ugly 2022 is being driven (at least in part) by factors beyond the company’s control. Lockdowns and government stimulus payments during the pandemic pulled demand forward. Input costs remain elevated. Consumer spending has pivoted toward experiences and away from products. There is some hope that pressure will ease in 2023 and beyond.
Perhaps most importantly, Traeger by all accounts makes an attractive product. Its Net Promoter Score, a measure of customer satisfaction, is the highest in the grill category, per figures cited in the company’s S-1 filing. Online reviews appear largely positive.
Even with those impediments, however, the short case here looks solid with earnings due on Wednesday morning. Valuation still looks potentially stretched. External factors play a role in 2022 results — but, importantly, the company’s response to current challenges will have clear repercussions in 2023 and beyond. And while Traeger grills are attractive, an enterprise value just shy of $1 billion remains far too high for what still looks like a niche product.
As well, COOK has rallied 52% in just three weeks. The catalyst appears to be news of a buyout for rival Weber WEBR 0.87%↑. The case for a short is that Q3 earnings might shift investor attention away from the sector and back to Traeger, reminding investors why they were so busy selling COOK stock in the first place.
[
