Buy SharkNinja Stock. It Has Been a Consistent and Successful Innovator.

Investors now can buy shares in the company after SharkNinja (ticker: SN) went public in an unusual fashion in late July, by being spun out of Hong Kong company
JS Global
Lifestyle.

Now, SharkNinja’s stock looks appealing, even after popping 10% last week in the wake of its initial earnings release as an independent U.S. company, showing rapid growth in second-quarter sales and earnings.

The shares, at around $35, trade for about 12 times projected 2023 earnings of about $3 a share, a discount to peers like
Helen of Troy
(HELE), Italy’s DeLonghi and France’s SEB. Helen of Troy controls brands such as Braun, Oxo, and Pur, while SEB controls Krups and All-Clad. Italy’s DeLonghi is known for its coffee machines. SharkNinja has a strong balance sheet, with only about $150 million of net debt to go with a $4.7 billion market value.

SharkNinja sells vacuums, hair dryers, and other products under the Shark brand, and kitchen appliances under the Ninja label. Sales are close to evenly divided between the two. Vacuums are its largest category.

“It’s a gem that’s about to be discovered,” says Eli Samaha, a portfolio manager at Madison Avenue Partners, which holds the stock. He says the stock remains inexpensive because of the way it went public and the lack of analyst coverage. He thinks shares could hit $50, or about 16 times his $3.20 a share projection for 2024 earnings. “SharkNinja has been able to produce new products in categories that haven’t seen much innovation at attractive prices that delight consumers,” he says.

One of the company’s winners is a $199 ice-cream maker, the Ninja Creami, which was introduced two years ago when the category had about $50 million in total U.S. sales. The Creami now generates $150 million in annual revenue.

“Consumers can customize their ice cream and it’s a fun experience,” says Barrocas. “We’re not just entering markets to gain share but to enlarge the total size.” The Creami also allows users to make sorbet using fruit.

SharkNinja now leads in hair dryers at the $100 to $300 price point, after entering the market two years ago. Its best-known dryer is the $299 Shark FlexStyle, which competes with the twice-as-expensive Dyson Airwrap.

Part of the impetus for that dryer came from one of Barrocas’ two daughters, who told the CEO that there was no good alternative to the Dyson dryer. Many online reviewers have found the Shark FlexStyle to be as good—or nearly as good—as the Dyson dryer. Both can curl, straighten, and otherwise style hair, as well as dry it. The FlexStyle has been introduced in 17 European countries.

On the earnings call, Barrocas emphasized SharkNinja’s speed to market backed by an engineering and design team of 700 in the Boston area, London, and China, and marketing efforts that combine TV (including infomercials), influencers, and social media.

One example: SharkNinja partnered with Kim Kardashian’s hair stylist Chris Appleton “to democratize high-end styling and bring the celebrity hairstyling experience to the masses.” Other successes include blenders that turn ice to “snow”—favored for some mixed drinks—and air fryers, popular with health-conscious consumers.

Barrocas noted on the call that all of the company’s growth has been organic. “We have not bought a dollar of growth,” he said.

SharkNinja’s efforts are paying off. Adjusted sales were up 19.7% in the second quarter, bucking a tough consumer environment, while adjusted net income rose 42% to 47 cents a share. SharkNinja projected full-year earnings of $2.85 to $3.02 a share, up 20% to 27% from 2022 and an adjusted sales increase of 10% to 12%.

International sales are running at 25% of revenue and growing fast—up about 70% in the latest quarter as SharkNinja expanded in Europe. The U.K. is a big market, with sales hitting $500 million last year, up tenfold since 2014. One weak spot: vacuums with cords. Consumers favor the cordless variety. The company continues to roll out new products including a wood-fired grill and a $179 beverage maker called Ninja Thirsti that enables users to make customized flavors of still and sparkling water.

Risks include its continued ability to innovate, the health of consumer spending, and a reliance on Asian manufacturing, including China. There’s also an overhang of stock with C.J. Xuning Wang, JS Global’s CEO and SharkNinja chairperson, owning 57% of the company.

SharkNinja deserves the benefit of the doubt. It has succeeded in a tough business and all signs are that it will continue to innovate and deliver for investors as a public company.

Write to Andrew Bary at [email protected]