Analysts are upbeat about the prospects for zero-calorie beverage company Zevia PBC, but investors aren’t so much.
shares plunged nearly 14% in Monday trading even as analysts initiated coverage of the company with bullish stock ratings.
Zevia began trading in July, opening 10.7% below the IPO price out of the gate.
Goldman Sachs calls Zevia a “fast-growth beverage company that checks all the boxes of an on-trend consumer brand via its ESG-oriented portfolio of zero calorie, zero sugar & natural stevia-sweetened beverages.”
Analysts initiated the stock at buy with a $28 price target.
Goldman puts the value of the global beverage category at $770 billion, and says the growth potential for Zevia is large, with many convenience stores expressing a willingness to carry the drink. Some hadn’t ever heard of it.
“In particular, we see a big distribution opportunity to go deeper & broader into existing channels (mass/grocery/natural) and new channels (esp. convenience stores) as the most important driver behind our robust growth outlook,” the note said.
And with Red Bull alum Amy Taylor joining Zevia, analysts think her knowledge of the convenience store space will be an asset.
“We view Zevia as a unique opportunity within non-alcoholic beverages, especially in an environment where growth is scarce and there are few small-to-mid sized market cap opportunities for investors,” wrote analysts led by Bonnie Herzog.
Wells Fargo initiated Zevia at overweight with a $16 price target.
“Zevia has made its mark—the only brand in the top 25 of low-calorie carbonated beverage SKUs not owned by the big three,” analysts led by Chris Carey wrote.
Wells Fargo sees opportunity not just at convenience stores, warehouse clubs, and major retailers like Walmart Inc.
and Target Corp.
but also on the aisles within these channels.
“Of note, velocity is much lower vs traditional CSD [carbonated soft drink] peers, owing to dierences that exist between CSD vs natural aisles (where Zevia predominantly sits). Can Zevia get into the CSD aisle? There are hurdles (dedicated teams to merchandise, buy-in from retailers, etc.), but it’s a long-term opportunity,” said Wells Fargo.
Morgan Stanley initiated Zevia at equal-weight with a price target of $14.50. Analysts see the potential for top-line growth, but also see the prospects for growing competition.
“We do see heightened competitive risk at Zevia, given a plethora of low/no calorie competitors in both artificial and natural sweeteners, and limited barriers to entry for its Stevia based products if the category continues to scale up and attract the interest of lager players,” analysts led by Dara Mohsenian wrote.
“Zevia has competition both from larger established players, who strategically are very focused on developing healthier, lower-calorie products, as well as more innovative younger companies or start-ups.”