GURU Organic Energy wins price target raise at Roth

In a Sept. 11 report, Roth Capital Markets analyst Sean McGowan raised his 12-month target price on GURU Organic Energy (GURU Organic Energy Stock Quote, Chart, News, Analysts, Financials TSX:GURU) to $4.00 from $3.75, reiterating a “buy” rating.

The move reflects higher estimates and greater confidence that the Montreal-based beverage company can sustain positive Adjusted EBITDA going forward.

Founded in 1999 by Joseph Zakher, GURU produces and markets natural, organic and plant-based energy drinks, distributed through convenience stores, grocery and drug channels, wholesale clubs, food service and online platforms.

Prior to its 2020 IPO, the company had consistently delivered profitable growth before deploying IPO proceeds to accelerate expansion across Western Canada and the United States.

“We believe this strategy has now been validated, as GURU reported its first profitable quarter since the IPO on revenues that have risen roughly 60% since then,” McGowan said. “Its margin and operating cost structure following the end of its Pepsi distribution agreement leave the company well poised to achieve sustainable profitable growth if it chooses to.”

McGowan said GURU’s stronger-than-expected third-quarter 2025 performance, where revenue surged 31% to $10.4-million, gross margin excluding one-time adjustments came in at nearly 66%, and operating expenses were well below forecasts. That combination produced the first profitable quarter since the third quarter of 2020, just before its public listing.

“We had not expected the company to post positive net income until early 2027,” he said. “We now see GURU as capable of delivering profitable growth, even if management opts to reinvest in marketing programs that could make some periods unprofitable.”

Canadian net sales climbed 35% year-over-year while U.S. revenues advanced 16%. McGowan acknowledged that results were partly aided by replenishment of retailer inventories after light shipments under Pepsi in Q2, but noted this was offset by some returns of stock, “so the increase was not, in our view, unsustainable.”

Margins were another bright spot: excluding the Pepsi contract termination adjustment, gross margin reached 65.9%, above Roth’s 59.9% estimate and consistent with pre-Pepsi levels. About two-thirds of the gain stemmed from the shift in distribution, with the balance driven by price hikes and cost control. Roth lifted its 2025 gross margin forecast to 62.3% from 60.2, and its 2026 view to 63.0% from 62.1.

Operating expenses of $6.3-million were $0.8-million below expectations and down from $7.0-million last year. Selling and marketing costs were $0.9-million lighter than forecast, partly because certain programs were shifted into Q4. McGowan expects the company to increase spending again to support long-term brand health.

Adjusted EBITDA reached $1.6-million versus Roth’s forecast for a $1.4-million loss, underscoring the potential for positive cash flow.

“We expect Adjusted EBITDA to remain positive in 2026 and beyond,” he said, while cautioning that net income could fluctuate as capital is deployed toward growth initiatives.

McGowan forecasts an Adjusted EBITDA loss of $1.5-million on $33.9-million in revenue for fiscal 2025, compared with his prior estimates of a $4.9-million loss on $32.2-million. For fiscal 2026, he expects $1.0-million in Adjusted EBITDA on $41.7-million in revenue, up from a prior breakeven forecast on $40.1-million.

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