Clean Label Trends Will Drive Health Beverage Expansion

Key Takeaways

• Strong brand momentum and expansion into new channels position Zevia for accelerated growth and increased market share versus established competitors.
  
• Product innovation, clean ingredients, and favorable regulatory trends are expected to drive premium pricing and higher margins, surpassing current market expectations.
  
• Ongoing losses, limited product appeal, rising costs, and industry pressures threaten Zevia's scalability, margins, and ability to compete or grow sustainably.

Catalysts

Develops, markets, sells, and distributes zero sugar beverages in the United States and Canada.

• Analyst consensus expects revenue growth from the fast-expanding better-for-you soda category, but this view may understate Zevia's momentum as household penetration and purchase frequency are already accelerating, positioning the brand to compound user growth and revenue at a rate well above category peers.
  
• Analyst consensus sees improved margins from cost savings, but Zevia's track record of outperforming its own productivity targets-now raising cost savings to $20 million-puts the company on a path to potentially realize industry-leading gross and EBITDA margins within the next two years, faster than generally anticipated.
  
• As clean ingredient and plant-based product demand intensifies, Zevia's transparent "zero sugar, zero fake colors, zero fake sweeteners" positioning and new flavor innovation are likely to increasingly command shelf space at the expense of legacy brands, unlocking premium pricing power and higher-margin sales.
  
• Regulatory trends toward taxing or restricting sugar-sweetened and artificially sweetened beverages could cause a disproportionate shift in mainstream customer demand toward Zevia's core offerings, rapidly expanding its total addressable market and driving sustained multi-year revenue inflection.
  
• With Zevia's expanded reach into club, convenience, and drug channels-where it is achieving record same-store sales and early-stage adoption akin to larger incumbents-there is meaningful untapped upside in repeat purchases and cross-category expansion (energy, tea, mixers), which can translate into materially higher long-term earnings and top-line growth than currently forecast.

Zevia PBC Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Zevia PBC compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Zevia PBC's revenue will grow by 7.3% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Zevia PBC will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Zevia PBC's profit margin will increase from -9.1% to the average US Beverage industry of 12.0% in 3 years.
• If Zevia PBC's profit margin were to converge on the industry average, you could expect earnings to reach $23.5 million (and earnings per share of $0.26) by about August 2028, up from $-14.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 28.2x on those 2028 earnings, up from -13.6x today. This future PE is greater than the current PE for the US Beverage industry at 26.9x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Zevia PBC Future Earnings Per Share Growth

Risks

• Zevia's continued operating losses and expectations for an adjusted EBITDA loss between $7 million and $9 million for the year signal that persistent negative cash flow could limit its long-term ability to invest in marketing, innovation, or distribution, putting future earnings and scalability at risk.
  
• Continued reliance on a stevia-sweetened, limited product portfolio exposes Zevia to consumer novelty fatigue and shifting preferences, especially amid growing skepticism towards "natural" and "zero-calorie" sweeteners, both of which could ultimately reduce brand appeal and limit revenue growth.
  
• Zevia faces rising input cost pressures, including from tariffs on aluminum and potential increases in sweetener and logistics costs, which are already impacting gross margin and could further erode profitability and net margins if not offset by efficiency gains.
  
• As beverage industry consolidation accelerates and large incumbents widen their distribution networks, Zevia's ability to gain and retain shelf space may be constrained, threatening both market share and top-line revenue growth over the long term.
  
• Strengthening regulatory focus on single-use packaging, labeling, and health claims could force Zevia into more expensive packaging changes or costly compliance upgrades, leading to higher SG&A and potential margin contraction.

Valuation

• The assumed bullish price target for Zevia PBC is $6.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Zevia PBC's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $6.0, and the most bearish reporting a price target of just $2.7.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $195.7 million, earnings will come to $23.5 million, and it would be trading on a PE ratio of 28.2x, assuming you use a discount rate of 6.8%.
• Given the current share price of $2.91, the bullish analyst price target of $6.0 is 51.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.