The Ratings Game: Grill maker Weber’s ‘significant’ U.S. manufacturing operations are a supply-chain advantage at a challenging time

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Many companies are facing supply chain challenges following pandemic-related shutdowns, but analysts say grill maker Weber Inc.’s manufacturing system will help that newly public company avoid many of those problems.

From Nike Inc.
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to Buckle Inc.
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to Yeti Inc.
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,
companies have discussed the supply chain issues they face due to a shortage of drivers and containers, facility shutdowns overseas and other issues.

Weber’s setup allows it to avoid many of those hurdles.

See: Foot Locker and Adidas join list of companies citing COVID-related supply chain challenges in Vietnam heading into the holiday shopping season

“Weber is uniquely positioned as the only major grill company with significant U.S.-based manufacturing as part of its ‘Make Where We Sell’ initiative,” wrote BMO Capital Markets analysts in a note. “Benefits from Weber’s supply chain/manufacturing initiatives can be seen through improved inventory metrics, with further future improvement expected ahead.”

BMO, which described Weber’s supply chain operation as “strong and sophisticated,” initiated coverage of the stock with a market perform rating and a $19 price target, or about 14% above its current price.

BMO analysts noted Weber’s dominant position in the grill category, with a share equal to about a quarter of the market.

BofA Securities highlighted Weber’s diverse portfolio.

“Weber is a leading outdoor cooking brand with a diversified revenue mix across gas grills (58% of 2020 revenues), charcoal grills (12%), pellet, electric, other (4%), and accessories and fuel (26%),” analysts said.

Read: Grill companies Weber and Traeger went public during BBQ season. Data shows one has the financial edge

BofA initiated coverage with a buy rating and $20 price objective.

Weber is also getting a boost from grilling and outdoor lifestyle trends that developed during the pandemic, according to KeyBanc Capital Markets.

“FY20 sales increased +17.7%, with FY21 projected +28.6%, but looking ahead, and as delta forces consumers to again rethink a return to normal, our survey work points to elevated desires for cook from home and time spent in backyards, shifts we think prove more enduring versus transitory,” analyst led by Brett Andress wrote.

The company offers long-term value thanks to its strong brand, consistent record and growth potential, they wrote.

KeyBanc rates Weber at sector weight.

Even with some tough comparisons ahead, JPMorgan analysts are bullish, and initiated Weber shares at overweight with a price target of $19.50.

“While the COVID lap presents difficult comparisons, we believe the robust new product pipeline (e.g., innovative Weber Connect technology, gas grill line re-launch), accelerating growth in direct-to-consumer and accessories, and secular factors (e.g., millennial household formation, semi-permanence of some COVID lifestyle changes like outdoor cooking/entertaining, multi-grill ownership) support continued sales growth (in addition to a record consumer environment in the U.S., ~50% of sales),” analysts said.

Weber began trading on Aug. 5 at $17, above its $14 IPO issue price. Days before, competitor Traeger Inc.
COOK,
-2.06%

began trading at $22, above its $18 issue price.

Credit Suisse analysts noted soaring interest in backyard cooking and outdoor grilling in its initiation of Traeger coverage. Moreover, analysts said Traeger has a leg up due to its focus on wood grilling.

“Traeger invented the original wood pellet grill and through innovation and technology it transformed it into an easy-to-use experience,” analysts led by Kaumil Gajrawala wrote.

“Traeger is under-penetrated in many parts of the U.S., its international business is extremely small, and the opportunity to drive consumables and accessories sales, and potentially expand beyond wood pellet grills, could attract additional consumers to the brand and expand its addressable market.”

Credit Suisse initiated Traeger stock at outperform with a $33 target price.

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“Owning only ~3% of domestic grill-owning households, Traeger is still in its relative
infancy with meaningful untapped awareness, and we expect a long runway of growth ahead as the company appears well-situated to gain share across a growing pie, via products/technology/innovation that helps make grilling more science and less art,” wrote BMO Capital Markets. Analysts there initiated Traeger at outperform with a $33 target price.

Stifel analysts called Traeger a “disruptive innovator” in the outdoor grill space. In addition to inventing wood pellet grilling, the company’s app and more than 1,600 recipes help users make a good meal time and again.

“Great results with the Traeger encourage usage frequency, advocacy, and community resulting in unique brand strength and momentum,” analysts said.

Stifel initiated Traeger stock as a buy with a $31 target price.

The Consumer Discretionary Select Sector SPDR Fund
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has run up 14% for the year to date while the S&P 500 index
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has gained 20.6% for the period.

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