What Happened?
Shares of coconut water company The Vita Coco Company (NASDAQ: COCO) fell 6.9% in the morning session after investors focused on a decline in the company's gross margin, which overshadowed an otherwise strong third-quarter earnings report.
The drop reversed a gain from the previous day when the company reported strong Q3 results that beat analyst estimates. In that report, Vita Coco announced sales grew by 37% and raised its full-year sales guidance. However, the company's gross margin fell to 38% in the third quarter from 39% in the same period a year earlier. This decrease was a result of increased product and tariff costs. Management had flagged potential tariff headwinds as a near-term issue, which could put pressure on margins if the company is unable to offset them with higher prices.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Vita Coco? Access our full analysis report here.
What Is The Market Telling Us
Vita Coco’s shares are quite volatile and have had 16 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 6.4% on the news that the company reported strong third-quarter financial results that beat expectations and issued upbeat guidance for the full year. Net sales for the quarter grew 37.2% year-over-year to $182.3 million, easily surpassing analyst estimates of $158.3 million. The company's profitability also impressed, with earnings of $0.40 per share, which was well ahead of the $0.29 consensus forecast. This growth was supported by a notable 28.8% increase in sales volumes. Following the strong performance, Vita Coco provided an encouraging outlook, guiding for full-year Adjusted EBITDA of $92.5 million at the midpoint, which was above Wall Street's expectations. The strong top- and bottom-line results, coupled with the positive guidance, fueled investor confidence in the company's growth trajectory.
Vita Coco is up 21% since the beginning of the year, and at $42.42 per share, it is trading close to its 52-week high of $45.28 from October 2025. Investors who bought $1,000 worth of Vita Coco’s shares at the IPO in October 2021 would now be looking at an investment worth $3,144.
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