On Monday, James pitched YETI Holdings (YETI US) on Ausbiz as an undervalued growth stock. The video is here with a summary of the key ‘pitch points’ below;
As a refresher, YETI is a very high-quality designer, retailer and distributor of outdoor products like coolers (i.e. eskies) and drink ware.
Three key reasons we like YETI;
- It’s undervalued for the growth coming through; They’ll grow at ~10% on last year, and that’s the sort of growth YETI will do in the coming years. For context, that’s about twice the growth rate of JB Hi-Fi which trades on 22x and is sitting at all-time time highs, more than 2 standard deviations ‘expensive’ . YETI is trading on 14x, more than 1 standard deviation ‘cheap’ and is 60% below it’s all time high. The stock has been in a funk throughout 2024 though earnings have continued to improve, the business has gotten better, customer love continues to grow.
- Looming tariffs have created this opportunity. When campaigning, Trump proposed 60% tariffs on goods specifically coming from China. 60% is huge, and YETI sources most of its product from China. However, YETI has been working to diversify its manufacturing base, and by the end of 2025, it is targeting 50% of its production outside of China.
- Quarterly earnings have shown good growth, with recent Q3 earnings ahead of expectations and upgraded FY24 numbers. Earnings momentum is good, and if they continue to execute, the shares will re-rate. Overlay that with an improving macro. Trump 2.0 makes America Great Again. More wealth, more optimism = more high-end coolers being sold.
We view the downside as limited, underpinned by a $100m buy-back and the upside over the coming years as substantial, i.e. the risk/reward looks great.
MM is long & bullish YETI US ~$40
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