SharkNinja Soars 87% YTD, Hits New High: What's Next?

SharkNinja has soared 87% year-to-date, reaching new highs in the past two trading sessions. By contrast, the S&P 500 Consumer Discretionary index has climbed just 5.79% YTD.

Since its IPO on July 31 last year, the small appliance company's shares have jumped 226%.

While many consumer companies are grappling with weak demand and a downturn in consumption, SharkNinja has outperformed. What factors are driving its success?

Shark offers cleaning appliances, including vacuum cleaners, robot vacuums, and steam mops, targeting the mid-to-high-end market with most products priced below $200.

Ninja focuses on small kitchen appliances such as blenders, coffee makers, multi-cookers, juicers, and ice cream machines, also aimed at the mid-to-high-end segment. According to NPD data, Ninja has led U.S. small kitchen appliance sales for the past three years.

SharkNinja, founded nearly 20 years ago, was acquired by Chinese firm Joyoung in 2017. In 2019, the brands Joyoung, Shark, and Ninja were consolidated into JS Global Lifestyle, which went public in Hong Kong. In July 2023, SharkNinja was spun off from JS Global and listed independently on the New York Stock Exchange.

SharkNinja's latest second-quarter earnings surpassed expectations. Revenue climbed 38%, EPS surged 51%, and the gross margin increased by 600 basis points to 49.2%. All four major categories—cooking, cleaning, food, and others—posted double-digit growth. U.S. business grew 35%, while international operations expanded 46%.

The company's robust performance is driven by three key growth pillars: category expansion, product innovation, and continuous market development.

The company has consistently introduced new categories and diversified its product portfolio, thus mitigating operational risks. This year alone, it launched three new categories: fans, coolers, and frozen beverage machines. By the end of Q2 2024, the company had entered 34 subcategories, up from 27 at the end of 2022.

Moreover, the company is fostering growth within its existing categories. The cleaning category, a core segment since the company's inception, faced a broader market slowdown post-pandemic. Despite this, ongoing R&D and category innovation led to a 20% year-over-year increase in cleaning product sales in Q2, a marked acceleration from the 6% growth in Q1, compared to a full-year growth rate of just 5% in 2023.

Company data show substantial market share gains across multiple categories in the U.S. and U.K. since 2020. In the U.S., the market share for Air Fryers rose from 15% to 33%, while in the U.K., the market share for Fryers surged from 20% to 60%.

Chief Executive Officer Mark Barrocas announced during the earnings call that the company plans to launch 25 new products in 2024, with 80% falling under existing categories.

The ability to sustain product innovation is credited to a robust supply chain. Shark's products are entirely manufactured by third-party suppliers, establishing a stable, high-quality global supply network across China, Indonesia, Malaysia, and Singapore.

The third pillar of the company's growth is international market expansion. The UK remains the largest international market, with Q2 growth at 7%, showing a year-over-year slowdown. Barrocas stated, "Our UK business is more diversified, more profitable, and overall healthier than ever before. Within Continental Europe, we drove triple-digit growth in Germany and France."

“We are well-positioned in the market and expect robust performance in the coming years, especially as we switch to a direct model at the beginning of next year. We are also looking forward to launching in Brazil in Q4 this year and exploring other Latin American markets for future launches," Barrocas added.

Several analysts have raised their price targets for SharkNinja following its second-quarter earnings report.

Bank of America increased its target price from $100 to $130, maintaining a Buy rating. The Q2 performance was driven by robust domestic growth. BofA believes SharkNinja will continue to show strong growth momentum in new categories, with international business expected to contribute consistently.

JPMorgan raised its target price from $80 to $97, maintaining an Overweight rating. SharkNinja continues to defy the trend in a challenging consumer discretionary landscape, which should boost investor confidence in the company's ability to execute its key growth strategies and sustain a competitive edge, JPMorgan asserts.

Jefferies increased its target price from $100 to $115, also maintaining an Overweight rating. The firm is "incrementally bullish" on SharkNinja's near-, medium-, and long-term prospects. Jefferies is optimistic about the company's innovation flywheel and diversified business model.