Guru posted 11% growth in Canada, mainly driven by the launch of a Fruit Punch with Theanine. (Photo: 123RF)
What to do with the securities of Guru, LVMH and Laurentian Bank? Here are some analyst recommendations likely to move prices soon. Note: the author may have a completely different opinion than that expressed by the analysts.
Guru (Guru, $2.27): record revenues for Guru
The energy drink company presented its results for the third quarter of fiscal 2023 on Thursday with revenue up 15%.
Revenue of $8.9 million was above the expectations of Stifel analyst Martin Landry, who expected $8.4 million and also beat the consensus of $8.7 million. .
Guru posted 11% growth in Canada, mainly driven by the launch of a Fruit Punch with Theanine.
Sales in the US market increased by 38% following record sales during Amazon Prime Day in July and the success of a partnership with Costco which saw Guru products in forty branches across the greater region from Los Angeles.
Losses before taxes, interest and depreciation reached $3 million for the quarter, better than the forecasts of Martin Landry who attributes this result to a drop in expenses in the sales and marketing sector.
Cash expenses for the quarter were $1.8 million, down compared to the same quarter last year when they amounted to $4.8 million.
As of July 31, the company had $38.7 million in capital as well as an unused credit line of $10 million. A sum sufficient to finance its operations for the next 24 to 30 months.
Guru’s gross margins fell 3.6% compared to the third quarter of 2022 to 51.2% while the Stifel analyst expected margins of 52.7%.
Half of this decline is mainly explained by an increase in the company’s promotional activities in response to those of its competitors, for the other half it is the increase in the cost of inputs which is to blame.
“Given the competitive nature of the Canadian market, and the expectations for Guru to remain aggressive in its pricing for the future, we do not anticipate any short-term improvement in gross margins. We have reduced our forecasts by 2% for this to 51.6% for the year 2024,” explains Martin Landry.
Guru’s market share remained stable at 4.6% in the Canadian market. A performance which disappoints the analyst given the distribution agreement with PepsiCo, the increased investments in marketing and the successful introduction of new innovative products.
Management claims to have gained market share in other Canadian provinces but in Quebec, its largest market, its competitors have led an aggressive campaign on prices, which has caused it to lose ground.
Following the third quarter results, Martin Landry increases its revenue forecast by 2% for 2023 but reduces its gross margin estimate by 0.5% to 50.5%, due to the aggressive promotional climate in the sector and the increase in input costs.
Analyst cuts expectations for losses before taxes, interest and depreciation by $2.7 million to -$12 million for 2023 and lowers 2024 forecast by 20% to -$10 million, to account for lower spending of marketing.
Martin Landry maintains his buy recommendation but lowers his one-year target price, from $3.75 to $3.50.
Matthew Hains
