Vita Coco: Insider Selling, Earnings Momentum, and Tariff Risks - Is This the Right Time to Buy?

In the ever-evolving landscape of global markets, contrarian investors thrive on identifying misalignments between short-term volatility and long-term fundamentals. The Vita Coco Company (NASDAQ:COCO) presents a compelling case study in this regard. Recent developments-including robust Q3 2025 earnings, significant insider selling, and looming tariff risks-create a nuanced picture that demands careful scrutiny.

Earnings Momentum: A Beacon of Growth

Vita Coco's Q3 2025 results underscore its resilience and strategic agility. The company reported net sales of $182 million, a 37% year-over-year increase, driven by a 42% surge in coconut water sales and a 6% rise in private label revenue, according to the company's Q3 press release. This outperformance-exceeding analyst estimates by $24 million in revenue and 34.6% in EPS-reflects strong consumer demand and effective pricing strategies, as noted in a Yahoo Finance analysis. Non-GAAP Adjusted EBITDA climbed to $32 million, with full-year guidance now projecting $90–$95 million, a 10% upward revision from prior expectations, per the earnings call transcript.

The company's financial health further bolsters optimism. With $204 million in cash and no debt, Vita Coco has repurchased $10.2 million of shares year-to-date, signaling confidence in its intrinsic value. International expansion and product innovation, such as the 182% growth in Vita Coco Treats, also highlight its ability to diversify revenue streams, per the earnings call transcript.

Insider Selling: A Contrarian Red Flag?

While earnings momentum is undeniably strong, insider transactions raise questions. COO Jonathan Burth sold $715,988.85 worth of shares in September 2025, reducing his ownership by 18.10%, according to a MarketBeat alert. Chairman Michael Kirban liquidated $1.17 million in shares earlier in the quarter. These sales, disclosed under SEC Rule 10b5-1 trading plans, suggest premeditated strategies rather than panic selling. However, for contrarians, such activity often signals potential overvaluation or internal concerns about future challenges.

Burth's recent exercise of stock options and subsequent sales under a structured plan indicate a focus on liquidity, possibly to diversify personal holdings. Yet, his remaining 76,127 shares of direct ownership suggest continued alignment with long-term shareholder interests, per the earnings call transcript. The broader question remains: Are insiders cashing in due to overconfidence in near-term gains, or are they hedging against known risks like tariffs?

Tariff Risks: A Cloud Over Margins

Despite its financial strength, Vita Coco faces a critical headwind: U.S. import tariffs. These have compressed gross margins by 110 basis points to 38% in Q3 2025, with forecasted additional costs of $14–$16 million in 2025, according to the earnings call transcript. While the company has raised prices and optimized supply chains, sustained tariff pressures could erode profitability, particularly in its private label segment, which management expects to remain a drag until early 2026, as discussed on the call.

Contrarians must weigh these risks against Vita Coco's strategic responses. International expansion, for instance, offers a buffer by diversifying geographic exposure. Similarly, the launch of high-margin products like Vita Coco Treats demonstrates innovation as a countermeasure to margin compression.

The Contrarian Case: Balancing Optimism and Caution

For investors with a long-term horizon, Vita Coco's combination of strong revenue growth, robust cash reserves, and strategic innovation presents an attractive opportunity. The insider sales, while noteworthy, may reflect personal financial planning rather than a lack of confidence in the business. Moreover, the company's ability to raise guidance and outperform analysts suggests operational discipline.

However, the tariff risks and private label headwinds cannot be ignored. A contrarian approach would involve monitoring key metrics: the pace of international expansion, the impact of tariffs on gross margins, and whether insider selling persists. If Vita Coco can navigate these challenges while maintaining its growth trajectory, the stock could offer asymmetric upside.

Conclusion

Vita Coco's Q3 2025 performance is a testament to its market leadership and adaptability. Yet, the interplay of insider activity and external risks demands a measured perspective. For contrarians, the current valuation-despite strong earnings-may represent a buying opportunity, provided the company's strategic initiatives align with its long-term vision. As always, the key lies in distinguishing between temporary turbulence and structural transformation.