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Investing.com -- On Wednesday, Ningi Research announced it is shorting the shares of The Vita Coco Company (NASDAQ: COCO), citing several concerns including sluggish year-over-year sales growth, a decline in market share, and the impending termination of a significant contract with Costco (NASDAQ:COST). Vita Coco, known for its coconut water products, has been labeled as a "one-trick pony" by Ningi Research, which claims the company has failed to diversify its product offerings effectively.
According to Ningi Research, Vita Coco’s sales growth in 2024 was a mere 4.5%, significantly lagging behind the broader ’Better for you’ beverage category’s growth of 15.4%. The research firm also points out that Vita Coco’s market share has been on a downward trend, dropping from 45% in 2023 to 41% in the fourth quarter of 2024. These figures contrast sharply with Vita Coco’s past claims of market dominance.
The situation is further exacerbated by Vita Coco’s largest private label customer, Costco, deciding to end its contract with the company, a move that is expected to result in a $90 million revenue shortfall for Vita Coco by the end of 2025. Ningi Research suggests that Costco’s decision was influenced by Vita Coco’s unreliable delivery in the past year, which has prompted Costco to seek alternative suppliers for its Kirkland brand coconut water.
Vita Coco’s internal challenges are also highlighted, including undisclosed related-party transactions and supply chain mismanagement. Ningi Research contends that the company’s inventory shortages in 2024, which led to strained retail partnerships and sales declines, are indicative of deeper structural issues. For instance, Walmart (NYSE:WMT) has demoted Vita Coco’s branded products to less trafficked aisles and significantly reduced the number of stock-keeping units (SKUs), resulting in a double-digit sales decline across Walmart stores.
Ningi Research further accuses Vita Coco of misleading investors about its market share, growth, and performance. The research firm claims that Vita Coco’s attempts to diversify its product line have been unsuccessful, with several product discontinuations and the indefinite pause of its ’Ever&Ever’ water line. Additionally, the acquisition of the energy drink ’Runa’ has been labeled as disastrous, with Ningi Research alleging that Vita Coco has failed to write off $7.7 million in goodwill related to Runa, which would have impacted the company’s EBITDA.
The research firm also criticizes Vita Coco’s executive team for cashing in on what it considers an illogical company valuation, with the CEO and other insiders selling over $58 million in stock after raising revenue guidance. Ningi Research concludes that Vita Coco’s stock is overvalued and projects a 49% downside for the stock based on its assessment.
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