We came across a bullish thesis on SharkNinja, Inc. (SN) on ValueInvestorsClub by investor8888. In this article we will summarize the bulls’ thesis on SN. SharkNinja shares were trading at $71.88 when this thesis was published, vs. closing price of $96.3 as of Sept 10.
A customer holding a hot air fryer in their kitchen, the convection current visible.
SharkNinja, Inc. (SN), spun off from JS Global last summer, is capturing significant market interest as it begins to unlock its value on the U.S. exchange. Previously generating over 80% of JS Global’s profits, Shark Ninja has demonstrated remarkable growth, with a 25% compound annual growth rate (CAGR) from 2019 to 2023. The company is bifurcated into two main segments: Shark and Ninja, each contributing about half of the business. The product lineup includes a diverse range of appliances such as vacuums, blenders, coffee machines, air fryers, and grills, and has expanded into 27 sub-categories encompassing cleaning, cooking, food preparation, and more.
The company’s success is anchored on three strategic pillars: expanding share within existing categories, venturing into new ones, and globalizing its brand. For instance, Shark’s entry into the premium hair dryer market and Ninja’s introduction of the CREAMi ice cream maker have yielded impressive results, with significant market share gains and revenue growth. The strategy to launch two new products annually—one from each brand—further fuels growth. Internationally, Shark Ninja is making strides in Europe, with strong performances in Germany and France, and anticipates sustained growth in the U.K., Germany, and Japan. The company views its total addressable market (TAM) of $112 billion in small appliances, which has been growing at a robust rate, as a substantial growth avenue.
The investment thesis for Shark Ninja is bolstered by continued sales growth, driven by a mid-teens percentage increase in sales and a projected doubling of sales over the medium term. The company’s product innovation is supported by substantial R&D investments, and its expansion into new product categories and markets like the EU presents promising prospects. Strong value propositions and competitive pricing have helped Shark Ninja gain market share, supported by the growing middle class and favorable post-COVID conditions. The company’s financials reflect material margin expansion, with gross margins rebounding to 45-50% and EBITDA margins in the mid-to-high teens. Reduced commodity costs and operational efficiencies further enhance profitability.
Valuation remains attractive despite the company’s robust performance and future potential. Trading at 18 times price-to-earnings ratio, Shark Ninja appears undervalued compared to peers like YETI, suggesting a potential upside if the company continues to outperform and execute its growth strategies. Potential catalysts include strong quarterly earnings, successful new product launches, and a possible resumption of dividends, which could appeal to income-focused investors.
However, there are risks to consider. The company’s reliance on Jouyoung, its OEM, might pose issues until diversification is complete. Questions also linger about the sustainability of its rapid growth and its ability to maintain innovation in a highly competitive market. Economic uncertainties, such as a potential recession in the U.S. or EU, and customer concentration—relying heavily on major retailers like Walmart, Amazon, and Costco—could also impact performance. Despite these concerns, Shark Ninja remains a compelling investment with considerable upside potential, provided it continues to execute effectively and navigate market challenges.
SharkNinja is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 52 hedge fund portfolios held SN at the end of the second quarter which was 57 in the previous quarter. While we acknowledge the potential of SN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as SN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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