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Up 95% in 2020, is Yeti Stock Still a Buy?

YETI (YETI) makes popular products for outdoors activities. It has a loyal and cult following as well which gives it pricing power against its competitors. The stock is up 95% YTD. Read more to find out if it's still a buy.

Located in the rapidly growing tech mecca of Austin, Texas, Yeti (YETI) is one of the more intriguing publicly traded companies. YETI’s products are well-made, fairly priced, and loved by customers far and wide. Just about everyone interested in outdoor and recreation activities owns a YETI product or has at least considered buying one.

From hunting to camping, fishing, farming, barbecuing, and beyond, YETI products are used for myriad purposes. However, YETI has climbed nearly 100% this year. It is fair to question whether the stock is worthy of your investing dollars at its current price level or if it is better to wait until some of the gains are reversed with seemingly inevitable profit-taking.

Let's take a look at whether YETI's bull run will continue or if the stock is more likely to cool down in the months ahead.

Will the Pandemic Continue to Propel YETI to new Heights?

This is a fair question to ask simply because it appears as though the pandemic has changed customer behavior in significant and potentially lasting ways. The masses shifted away from consumerism and sports toward outdoor activities during the pandemic. This phenomenon has greatly benefitted YETI as evidenced by its rapid ascension.

YETI's coolers, drinkware, and other outdoor items have sold like hot cakes across the past nine months. YETI revenue is up 29% every quarter. YETI's direct to consumer (D2C) sales are up more than 60%. The company's net income is up more than 140%.

YETI's brass deserves credit for shifting channels during the pandemic, moving its focus to selling online as opposed to brick-and-mortar retail stores. This shift has hiked the company's sales, margins, and gross profitability. YETI's direct sales are creating a mutually beneficial relationship with customers that bodes well for brand engagement and loyalty for decades to come.

Add in the fact that YET is still expanding its business across the entirety of North America as well as the rest of the globe and investors have all the more reason to be bullish on the stock. The shift toward DTC is facilitating this challenge, helping to connect YETI with that many more customers in regions throughout the world.

What About YETI’s Marketing?

If you are struggling to remember the last YETI ad you saw on TV or elsewhere, you are not alone. YETI does not market traditionally. Rather, YETI is largely dependent on influencer culture prominent on social media. The company is quite active on its Instagram page and other social media platforms. However, only so many people are willing to visit a corporation’s social media page. If YETI’s marketing strategy does not evolve beyond the realm of social media, it could spell trouble for the company.

YETI Products Will Still be Sold Through Wholesale Channels

Though YETI products are selling briskly on the web, consumers also have the opportunity to buy these items through brick-and-mortar stores. In particular, YETI has a distribution partnership with the home improvement specialist Lowes. In fact, the bulk of YETI’s business stemmed from such retail stores before the pandemic. This means the company is perfectly positioned to generate sales growth in traditional stores and also online, efficiently maximizing its brand footprint, ultimately adding to its bottom line in the short-term and also across posterity.

Is YETI Overvalued?

YETI currently has a forward P/E ratio of 40.67, a fairly high figure considering the company sells coolers and similar items. Add in the fact that most of YETI’s products are built to last instead of designed with planned obsolescence and investors have even more reason to be concerned that the stock might be overvalued.

The top analysts insist YETI is overvalued at its current trading price of $72.22, setting an average price target of $64. If this prediction holds, then the stock will go on an 11% slide. However, offsetting this bearish outlook is YETI’s POWR Rating components. The stock has an "A" grade in the Peer Grade, Trade Grade, and Buy & Hold Grade components. Of 35 stocks in the Consumer Goods space, YETI is ranked third.

The Verdict

YETI may slightly increase or stagnate moving forward. However, the stock stands a good chance of enjoying a holiday bump thanks to the ongoing spike in sales. Buy YETI before the holiday hoopla, hold it through the first quarter of ’21 and reevaluate your position now.

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YETI shares were trading at $73.30 per share on Friday morning, up $1.33 (+1.85%). Year-to-date, YETI has gained 110.75%, versus a 16.36% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.


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