Steer clear of grill maker Weber as the company grapples with slowing demand and a lengthy product replacement cycle disrupted by Covid-19, Bank of America says. “We rate WEBR shares underperform given softer near-term demand trends as Covid-19 drove a demand pull forward and replacement cycles remain long,” wrote analyst Robert Ohmes in a note to clients published Monday. The downgrade from Bank of America comes amid disappointing quarterly results from the Illinois-based company and an announcement that Chris Scherzinger would depart as CEO. At the same time, Weber suspended its quarterly cash dividend. Weber sales got a boost during the pandemic as consumers cooked more from home, but demand for its products has eased as consumers trim spending in the face of rising inflation and a potential recession. The product replacement cycle for grills typically spans about seven years but record numbers of consumers purchased new grills between 2019 and 2021, Ohmes said. That will likely hinder the near-term cycle going forward. Along with the Bank of America, Wells Fargo also downgraded Weber, to underweight. “Besides the obvious (profit, especially, was well below expectations), the most salient take, in our view, is that leverage is going to be (and remain) uncomfortably high, requiring WEBR to renegotiate covenants with lenders, and start a long process to de-lever over the next several years,” Wells analyst Chris Carey wrote in a note to clients Tuesday. “With this setup — low visibility on fundamentals and high leverage — it’s hard to see the stock working.” Shares of the company have plummeted 49% since the start of 2022 and sank nearly 13% on Monday. The fresh price target from Bank of America implies almost 24% of downside for the stock from its previous close. Weber shares fell another 4% in premarket trading Tuesday. — CNBC’s Michael Bloom contributed reporting
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