With no heat in Weber’s Outlook, Inc., stocks are falling
There were high hopes Weber, Inc. (NYSE: WEBR) and the charcoal industry in general, but those hopes have faded. While business is still good, growth is slowing under the influence of inflation, supply chain headwinds and a lack of stimulus and stocks are suffering. The news that investors have to face is that the downward trend in price action may continue due to the decline in sentiment among analysts and there are no good support targets.
Analysts still hold Weber because he is a big brand with a global reach. Eventually, supply chain problems will be reduced or compositions will be made easier again and winds against price action will slow down. Until then, the target price trend is decidedly downward and the consensus of Marketbeat.com went down after the publication of the second quarter results. Four of the seven analysts who followed the shares lowered their price targets to a range of $ 6.50 to $ 9.00 compared to the consensus of $ 8.92. The low target implies that the stock is slightly overvalued at current levels, while the high price target suggests that a 30% rise is possible.
Weber, Inc. is burning with inflation
Weber, Inc. had a good quarter considering last year’s offsets and supply chain headwinds. The company posted net income of $ 607.92 million, 7.2% less than last year, but 46% more in the two-year stack. The bad news is that revenue lost Marketbeat.com consensus by 775 basis points on weakness in the Americas. Sales in America fell 18%, but rose 41% from two years ago, while EMEA grew 9% and APAC contracted 6%. APAC, it should be noted, has risen 157% in the two-year stack due to the company’s growth efforts in the region.
Down with the report, there is good and bad news. The good news is that margins improved by almost 1200 basis points sequentially due to pricing efforts. The bad news is that margins are still down 1,200 basis points from last year due to volume deleveraging, the cost of incoming transportation, shipping and material costs. This left BAP GAAP in negative territory despite the expectation of profits and jeopardizes the dividend. GAAP $ -1.02 was lost by $ 1.18, leading to an increase in cash and debt burning.
Weber issued a dividend about a week before the earnings were announced, but we are not convinced of their safety. The $ 0.16 annual payment is worth about 2.32% return, but the payment is not covered by earnings, at least in 2022. Given the margin issues and the second-quarter cash burn, we believe that the company will have to suspend it before next quarter unless there is a serious change in operating conditions. As it stands now, the company’s cash position has halved compared to last year and there is no reason to think that it will not get worse by the end of this quarter. Price increases may improve margins, but will not stimulate sales.
The technical outlook: Weber falls under the pressure of short selling
Weber, Inc. has been on a steady downward trend since the IPO due to the hype that went into the stock market and the growing number of problems that have arisen since then. The downward trend is also driven by a high and rising short interest rate which has more than 40% of the market sold short. This situation will eventually lead to a short coverage rally and possibly a very strong short close, but now there is no indication that this will happen. What we hope to see now is to trade sideways at best and a new minimum set at worst, possibly several new lows because no one seems to be very interested in buying these shares.