In a world obsessed with TV sensation “Shark Week” and viral kids song “Baby Shark,” SharkNinja, Inc. (NYSE:SN) is producing some thrills of its own. Shares of the consumer appliances maker are up more than 50% since August 4th — and becoming a popular momentum bet amongst retail traders.
The surge comes less than two months after SharkNinja’s wild July 31st initial public offering (IPO) that featured both big waves and falling knives. It was a ride that saw the stock run as high as $52.90 before it dipped as low as $25.84 just four days later.
Back in the low $40’s, bulls regained control of SharkNinja in the aftermath of the company’s second quarter financial update. Management announced that quarterly sales increased 22% to $950.3 million. While all four operating segments grew, the M.V.P. was the Cooking & Beverage Appliances business which boasted 38% sales growth. Translation: people bought a lot of air fryers and blenders.
SharkNinja cooked up even better profit growth. It reported a 40% jump in adjusted net income as lower freight costs drove a 370 basis point gross margin expansion. Combined with market share gains and commentary around a bright long-term outlook, CEO Mark Barrocas and company couldn’t have had a much better public market debut.
The volatile mid-cap has trended higher since the release and appears destined to return to its day one peak. Here’s why.
#1 - Investors Are Nibbling on IPOs
It’s not exactly a rip roaring comeback, but the U.S. IPO market is showing signs of improvement. In 2022, IPO proceeds were a meager $8.6 billion, 94% lower than in 2021. Through the first half of this year, IPOs already hauled in $10.1 billion. Much of the money has flowed into Johnson & Johnson spinoff Kenvue and solar technology upstart Nextracker, but companies across multiple sectors are benefiting.
Better yet, the recent and upcoming market debuts of Arm Limited, Stripe, Instacart and others are adding more hype to an IPO market on the rebound. And with technology this year’s top performing sector, investors’ appetite for tech-oriented newbies seems to be building. This bodes well for an innovator like SharkNinja whose products are as much tech toys as they are functional appliances.
#2 - Consumers Love Techy Home Goods
SharkNinja is classified as a household durables manufacturer, but it should be thought of as a technology disruptor. That’s because the company develops products that solve problems and improve daily life for consumers. At the surface, it’s two distinct brands, but underneath is a diverse set of products that span 27 categories. From high-tech cookware to smart vacuums to efficient curling irons, Shark Ninja seems to have a solution for everyone.
Even in an economic environment riddled with inflation and rising interest rates, consumers are showing a willingness to make room for tech-driven gadgets that better their lives — or at the very least, help them keep up with the Joneses. SharkNinja customers tend to be not only more affluent (and therefore more recession-proof) but also active on social media through product reviews and peer recommendations. This word-of-mouth creates an inherent group of brand ambassadors capable of powering sales to another level.
As SharkNinja continues to launch products in new and existing categories, it will have a growing cadre of tech-savvy consumers at its disposal. Its products will infiltrate more homes and more rooms across North America and overseas. Don’t be fooled. Like a true ninja, the company is a high-growth technology company in disguise.
#3 - Wall Street Sees Plenty of Upside
On September 11th, SharkNinja gapped up for the second time in less than a month. While the rollout of Shark Detect Pro robotic vacuums helped generate buzz, the stock got a pivotal boost from Wall Street. Jeffries initiated coverage of the stock with a ‘buy’ rating and an eye-popping $67 price target. The analyst noted the company’s “global rapid innovation” and potential to deliver strong revenue growth and margin expansion. If these forces fall into place, it would give SharkNinja an attractive fundamental profile that deep-pocketed hedge funds and mutual funds may find hard to resist.
Of course, this is only one opinion on a narrowly followed stock — but it's a heck of an early endorsement. With over 60% upside to the Jeffries target, it may not be too late to test the waters. This baby shark could grow into a killer investment.
