By Ian Salisbury

When it comes to Yeti Holdings, investors see the water bottle as half-empty. A better bet: Take a swig of the stock, which actually looks half-full.

Founded in Austin, Texas, by two outdoor-loving brothers, Yeti built a brand around adventure and ruggedness, selling $40 insulated mugs and $800 stainless-steel coolers. The company went public in 2018 and surged during the pandemic as hiking and "glamping" took off. By late 2021, shares had zoomed past $100 from an initial offering price of $18.

Today, the glam is gone. Yeti stock has been stuck in the $30s. Competitors like Stanley and Owala started their own water bottle fads. Earnings growth has slowed. And now there's a tariff threat: Yeti has historically manufactured its mugs and other drinkware in China, and those imports were recently hit with 10% tariffs by President Donald Trump. The stock has dropped 39% over the past three years.

Yet the market is missing Yeti's strength. Sales, while slowing in recent years, should start to pick up with some new product lines, overseas expansions, and a lift from investments in a promising category -- backpacks and luggage. The tariff threat looks manageable. And the stock's valuation isn't demanding, at 12.8 times 2025 consensus earnings estimates.

"At some point the market is going to realize the stock is way too cheap for what it is," says Jefferies analyst Randal Konik, who sees the stock reaching $55 within a year, up nealry 50% from Tuesday's close of $37.52.

There's nothing wrong with Yeti's financials. Wall Street is forecasting sales of $1.95 billion this year, up 6.5% from 2024, according to consensus estimates. Earnings growth is expected to accelerate from 7% this year to 8.5% in 2026, putting earnings per share at $3.17, up from an estimated $2.92 for 2025.

Yeti's backbone, drinkware, at around $1 billion in 2024 sales, is expected to grow 4.6% this year. Its coolers and equipment line, estimated at $754 million in sales for 2025, is expected to be up 8% this year and 6% in 2026.

Not everything is perfect. On its fourth-quarter earnings call on Feb. 13, the company said it sees signs of "discerning consumer buying, more promotional activity, and heightened competition, particularly in the U.S. market." That might be underselling the problem. Canaccord Genuity analyst Brian McNamara points out that 50% of Dick's Sporting Goods stores reported Stanley as the best-selling brand over the holidays, followed by 41% for Owala and 9% for Yeti. "Owala appears to be this year's Stanley, while Yeti fades into the background in drinkware," he writes.

CEO Matthew Reintjes dismissed the notion that Yeti is falling behind, saying it's focused less on fashion and more on getting its products into the hands of athletes through partnerships with schools and teams such as the Kansas City Current in women's soccer. "We expect drinkware to be a growth driver in all our markets," he told Barron's.

The data back him up. Global travel-mug sales are expected to double to $26 billion by 2033, according to market research from IMarc, suggesting there's room for multiple brands in the space.

Yeti, meanwhile, is finding new ways to grow. It has expanded overseas, where sales grew more than 30% to just under $340 million in 2024. While Yeti doesn't break out sales by country, Canada and Australia are its most established markets. On its recent earnings call, executives said the company has been expanding steadily in the United Kingdom and Germany. In January, Yeti held a Tokyo event to introduce its products to Japan.

International markets are a big opportunity, says Austin Bone, portfolio manager of the Wasatch Small Cap Value fund, which owns the stock. "There are similar brands that have a 40% to 50% revenue contribution from international," he says, compared with about 20% for Yeti.

A bevy of new Yeti goods, including coffee makers and a recently introduced $200 cast iron skillet, could also provide a sales bump. Yet the biggest opportunity might be in luggage, given Yeti's reputation for rugged quality and its outdoorsy vibe. Last year, the company acquired Mystery Ranch, a backpack maker with a small but dedicated following among firefighters and military personnel. In December, a limited-edition Yeti-branded backpack based on a Mystery Ranch design quickly sold out.

"[There's] a real opportunity for the brand to expand, without going too far outside what they are known for," argues William Blair analyst Phillip Blee.

Yeti's strong balance sheet -- it had $281 million in net cash at the end of last year -- should give it flexibility to continue investing in new markets while handing profits back to shareholders. The company carries minimal debt and boasts pretax operating margins that are holding steady at nearly 17%.

Buybacks could also nudge up earnings per share. Yeti's board has approved up to $450 million in buybacks, after repurchasing $200 million of shares in 2024. At a $200 million annual clip, Yeti would buy back a third of its current market value of $3 billion over the next five years, assuming its stock price holds steady and there's no additional share issuance.

Even without those buybacks, Blee expects earnings to hit $3.25 a share in 2026, slightly above Wall Street's average target. At 15 times earnings, that would put the stock at $49, up 30%.

Tariffs may not be the problem they're made out to be. Yeti began moving drinkware production out of China in 2023, and it expects 80% of U.S. production capacity to be outside of China by the end of 2025. The 10% Chinese tariffs will add just $10 million to Yeti's costs in 2025, according to Chief Financial Officer Mike McMullen. Reintjes expressed optimism that the company will manage through it.

"It's a little bit of a moving unknown," he said. "We're more focused on making sure that we position our supply chain in places that we think meet the business strategy. And then we'll manage the tariff exposure in the business."

Yeti isn't the leaky, beaten-up bottle the market considers it to be. Its coolers and drinkware can survive some hard knocks -- and the stock can, too.

Write to Ian Salisbury at ian.salisbury@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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February 26, 2025 02:00 ET (07:00 GMT)

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