Bank of America sees the stable shipping market as a positive catalyst for Vita Coco in the future. The company on Friday upgraded the beverage company’s stock to buy and raised its price target to $12 from $10. Shares jumped more than 10% on Friday to trade at around $10.95 per share. The new rating and price changes are based on higher adjusted EBITDA estimates for calendar year 2023, due to reduced ocean freight costs. The company now expects earnings for calendar year 2023 of $0.64 per share, up from its previous estimate of $0.46 per share. “We expect shipping costs to decline as the Drewry World Container Index is down 32 percent from its all-time high and continues to decline steadily,” wrote analyst Bryan Spillane in a statement on Friday. “. It is unlikely that falling shipping costs will help the company this calendar year, as two-thirds of Vita Coco’s container demand for the remainder of 2022 is covered by contract prices. However, BofA sees the company as well-positioned to weather a potential recession to come. “Additionally, we think COCO stock is well positioned to increase in price in the event of a recession as the company has introduced a minimum price this year, which makes its products,” Spillane said. become more attractive to price-conscious consumers.” Of course, there are additional risks to the corporate call. Inflationary pressures could worsen and push margins to recover, or a recession could slow volume growth. In addition, the competition may become increasingly fierce and destroy the market share of Vita Coco. But on the other hand, the company could see margins expand significantly if ocean freight costs fall faster than Bank of America expected. And, the company could see its portfolio grow steadily and continue to increase its market share, increasing the risk to the call.