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Traeger (COOK +27%) is lighting a fire under its shares today after topping earnings and revenue expectations in Q4. The grill maker's several highlights from the quarter overcoming its lackluster Q1 and FY23 sales guidance. With around 8% of float shares shorted, Traeger is also possibly amid a short squeeze.

Traeger had it rough since IPO-ing during the summer of 2021, experiencing only about a week of gains before a long grind down ensued, tumbling over 85% since. The company's IPO coincided with a series of headwinds, including lengthy supply chain constraints and a substantial uptick in inflation, slicing demand for discretionary items.

These challenges already ended rival Weber's short stint as a public company, whose IPO took place around the same time as Traeger's, agreeing to be purchased by a private equity firm late last year. After Weber was taken private, Briefing.com noted that it may be only a matter of time until Traeger is forced to pursue a similar route.

• Traeger is taking the necessary steps to emerge as a more efficient company after what is expected to be a continually volatile environment in 2023. These actions outlined last quarter include reducing its cost structure, rightsizing inventories, and targeting areas to improve gross margins. More specifically, Traeger closed its frozen meal kit business, reduced its headcount and capital expenditures, and lowered production in Asia.
• The benefits from these moves flowed through to Traeger's bottom line in Q4, delivering its widest earnings beat since 1Q22. The company also reiterated its $20 mln annualized savings target and identified additional savings opportunities for 2023.
  • On the other hand, sales of $138.13 mln, a 21% decline yr/yr, were not as jovial, marking Traeger's fourth-straight quarter of declining sales growth.
• The year ahead will be a tale of two halves. Traeger forecasted Q1 revs of $145-155 mln and FY23 revs of $560-590 mln, both meaningfully below consensus. Management noted it is keeping a cautious view on its 2023 planning due to a lack of clarity surrounding consumer spending patterns and elevated uncertainty regarding the Fed's monetary tightening policies, inflation, and the housing market.
• However, the second half of the year is looking up. Traeger expects to return to top-line growth in 2H23 even if market conditions remain the same, as its bullish outlook is predicated on normalized channel inventories. The company also anticipates an increase in adjusted EBITDA in FY23, projecting $45-55 mln, a solid improvement from $41.5 mln posted in FY22.

Bottom line, Traeger is trying to mount a massive comeback after enduring several setbacks since going public in 2021. Today's rally is a good start, but we caution chasing at these levels as 2023 is still expected to be a volatile year for Traeger. Finally, after Weber's buyout, Traeger remains a potential takeover candidate.