BBQ companies go public as COVID sends sales soaring

COVID gave dads the perfect reason to upgrade their grill — and for BBQ companies, Weber, Traeger and BBQGuys, to take their companies public. But are their stocks as appetizing as a good cookout?

Cookin’ up an IPO

A full year of lockdowns led to a common theme in household spending – backyard upgrades. Sales of outdoor and sports toys grew 51%, garden center sales by 31% and grills/smokers by 41%.

All of the fresh demand for new grills led to strong growth in the $5.2b BBQ industry, and Weber, Traeger, and BBQGuys decided it was the time to capitalize on it…

• Weber (NYSE:WEBR) and Traeger (NYSE:COOK) are going public via IPO and will likely be valued at ~$6b and $3b respectively.
• BBQGuys is going public via SPAC merger with Velocity Acquisition (NASDAQ:VELO).

How much gas is left in the tank?

All three companies saw red hot sales numbers over the last year thanks to the pandemic:

• Weber’s sales for the six months up to March grew 60% from a year earlier.
• In 2020, Traeger’s sales grew by over 50% and BBQGuys’ by over 70%.

Big growth… But can these sales numbers be sustained? Over 64% of U.S. adults own an outdoor grill or smoker, mostly purchased in the last year.

Both Weber and Traeger grills are considered long-lasting, and most Weber grills come with a ten-year warranty. With the lack of recurring revenue and slowing momentum in COVID-benefiting stocks, it’s tough to see growth continue post-pandemic.

Investors: Can BBQs buck the trend?

Companies going public have already raised $205b this year, smashing last year’s record of $168b. But the track record of newly public companies hasn’t been great in 2021…

• There’s concern the startup market is in an unsustainable bubble and new regulations could impact SPAC mergers.
• The Renaissance IPO ETF (NYSE:IPO), an ETF tracking the performance of major IPOs, is flat this year.

According to Coresight Research, the entire stay-at-home market growth rate could plummet 50% in 2021 — making it hard to see the BBQ industry staying hot as the market cools off.

Learn more: The dark side of investing in companies right when they go public.