Apr 25, 2022 (Penny Stocks via COMTEX) -- What Are Penny Stocks?
The definition of "penny stocks" includes shares of companies trading for less than $5. Many underlying companies are either in their emerging growth stages or businesses that have fallen on hard times. With the stock market down today, bearish sentiment is ruling the broader trends and sparking sell-offs in some of the most popular household name companies. I'm not just talking about companies like Netflix ( NASDAQ: NFLX ), PayPal ( NASDAQ: PYPL ), or Peloton ( NASDAQ: PTON ). I'm talking about companies that have been in such a strong downtrend that they're approaching penny stock levels. The biggest question for if or when that happens: can the stocks recover?
The short answer is yes, of course, they can. But it doesn't happen overnight. For example, look at companies like Nio Inc. ( NYSE: NIO ). The electric vehicle company's shares dove to the depths of penny stock levels a few years back. It took nearly a full year for NIO stock to recover completely. AMC Entertainment ( NYSE: AMC ) and GameStop ( NYSE: GME ) were also among the list of penny stocks that had fallen on hard times. The Ape movement had much more to do with their recoveries, but all the same, they were two more examples of how penny stocks can mount a comeback. Are there companies at risk of becoming penny stocks? Over the last few weeks, we've compiled articles discussing several, including:
DraftKings Inc. ( NASDAQ: DKNG )
Tattooed Chef ( NASDAQ: TTCF )
Robinhood Markets Inc. ( NASDAQ: HOOD )
SoFi Technologies ( NASDAQ: SOFI )
fuboTV Inc. ( NASDAQ: FUBO )
Though many of these are still trading higher than $5, it doesn't avoid the question of, "will they become penny stocks" based on the overall trend. Today we look at a popular grill brand, Traeger Grills ( NYSE: COOK ), as shares continue making new all-time lows this quarter. Will COOK stock become a penny stock in 2022?
Will COOK Stock Become A Penny Stock?
When this article was written, COOK stock had made a fresh, all-time low of $6.35. Like other names on the growing list of companies at risk of becoming penny stocks, Traeger recently went public. Last July, shares opened for trade under the COOK stock symbol at an opening price of $22. Shortly after, the grill and smoker company's shares would reach highs of $32.59, which continued to emphasize the potential of the grill company IPO mini trend we saw in 2021. Others going public included Weber Inc. ( NYSE: WEBR ) and a botched SPAC deal between Velocity Acquisition ( NASDAQ: VELO ) and eCommerce company BBQGuys.
Fast-forward about a year, and COOK stock is now less than $2 away from gracing the penny stocks stage. Continued earnings disappointments have spawned skepticism about Traeger's execution platform in the market. For instance, in the third quarter, the company reported an EPS loss of 78 cents per share. This didn't even compare with expectations of an eight-cent loss per share that analysts thought would be the case. In Q4, the company did post an EPS of $0.03 while also beating sales estimates compared to what analysts expected.
"While we are projecting lower than typical growth in 2022, our strong multi-year growth CAGR and market share gains give us confidence in our long-term opportunity to grow household penetration and to disrupt the grilling category. Despite near-term headwinds, we are very excited about the upcoming year with significant new product innovation throughout our categories, and we remain focused on executing strategic initiatives that we believe will drive long-term shareholder value," said Jeremy Andrus, CEO of Traeger.
COOK Stock Forecast
With more disappointing earnings and a muted outlook for growth in 2022, the market has reacted swiftly with a clear COOK stock forecast. Which analysts weighed in on Traeger this year?
Telsey Advisory COOK Stock Forecast: Outperform, Price Target Cut from $26 to $10
Jefferies COOK Stock Forecast: Hold, Price Target Set At $7
Credit Suisse COOK Stock Forecast: Outperform, Price Target Cut From $14 to $11
Piper Sandler COOK Stock Forecast: Overweight, Price Target Cut From $17 to $10
Stifel COOK Stock Forecast: Hold, Price Target Cut From $26 to $7.50
Morgan Stanley COOK Stock Forecast: Equal-Weight, Price Target Cut From $26 to $10
BMO Capital COOK Stock Forecast: Outperform, Price Target Cut From $23 to $16
Baird COOK Stock Forecast: Outperform, Price Target Cut From $20 to $12
While most of these stock market analysts hold bullish-leaning ratings, their price targets reflect a much different outlook. S&P recently revised its Traeger outlook to Negative from Positive on weak 2021 results citing higher leverage from the company.
The COOK stock forecast has come into question thanks to a slew of price target cuts and a downgrade from numerous firms. The current climate regarding discretionary spending during periods of higher inflation and continued supply chain disruptions has also put a focus on consumer stocks.
Should You Buy COOK Stock Right Now?
Is COOK stock a buy, or should you avoid it at all costs? As of this article, shares of Traeger are trading roughly 80% below last year's high of $32.59. Whether or not COOK stock is a buy might depend more heavily on how the company plans to grow while also decreasing its overall expenses. During the fourth quarter of 2021, sales and marketing expenses totaled $38.5 million, up from the previous year's $29.4 million in Q4, 2020.
Meanwhile, general and administrative expenses rose from $14.6 million to over $44 million during the same period. Net loss was $33.7 million compared to the previous year's $3.3 million net loss.
Traeger is still a newer company to the street and has some work to do as far as analysts are concerned. The company also directly said that it anticipates inflation and geopolitical unrest to impact consumer sentiment. Total revenue is expected to be between $800 million and $850 million for 2022, with adjusted EBITDA between $70 million and $80 million.
With Q1 earnings season in full swing, COOK stock could be in focus. The company anticipates revenues coming in between $208 million and $212 million for its first quarter in 2022. Will supply chain challenges and inflation negatively impact COOK stock, or will it pull an earnings surprise? If Traeger is on your list of stocks to watch, comment with your outlook for the company and whether or not you think new lows are in store.
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