Shares of Tattooed Chef Inc. (NASDAQ: TTCF) were down over 2% on Thursday. The stock has dropped 29% since the start of this year. There is a mixed sentiment in general about this stock particularly after the release of its earnings results for the second quarter of 2021 last week. Here are a few positive factors as well as risks to consider if you have an eye on this stock:
Pros
Tattooed Chef’s revenues grew nearly 46% to $50.7 million in Q2 compared to the same period a year ago. This was driven by a 62% growth in branded product revenue fueled by increased distribution and volume.
The company expects revenue to increase 58-63% to a range of $235-242 million for the full year of 2021. This assumes a year-over-year growth of 49% on the base business to $222 million along with a $13-20 million contribution from one of the two facilities from the Foods of New Mexico acquisition.
During the second quarter, Tattooed Chef expanded its distribution points in the US which helped drive strong growth in its branded products. Earlier this month, the company rolled out some of its products to more than 300 Sprouts Farmers Market stores and it has plans to launch 12 of its branded products in around 1,800 Kroger stores later this summer.
TTCF aims to make its branded products available in over 12,000 retail stores by the end of the third quarter of 2021, which is ahead of its previous goal of 10,000 stores.
The acquisition of Foods of New Mexico has given Tattooed Chef opportunities for further growth and expansion. Through this deal, TTCF can add a variety of Mexican food products to its product portfolio. The acquisition contributed $4.3 million in revenue during the second quarter and the company believes it has gained adequate production capacity to generate over $500 million in revenue going forward.
Cons
Despite the year-over-year growth during the second quarter, revenues fell short of estimates. The company also reported a net loss of $53.2 million in Q2 versus a profit of $1.3 million in the year-ago period.
A key cause of concern has been the slashing of the company’s margin and EBITDA guidance. For the full year of 2021, TTCF now expects gross margin to range between 16-22% versus the prior outlook of 20-25%.
The company also estimates an adjusted EBITDA loss of $14-17 million for the year. This compares to the previous expectation for adjusted EBITDA of $2-4 million. The company will need to make progress on its profitability and margins in order to maintain its momentum over the coming quarters.
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