Shares of Hershey Co HSY experienced a premarket surge on Monday.
The confectionery company’s market share and volume trends have shown remarkable improvement in recent months, as reported by Bernstein.
The Hershey Analyst: Alexia Howard upgraded the rating for Hershey from Market Perform to Outperform and raised the price target from $220 to $235.
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The Hershey Thesis: The company’s trends have seen an uptick since the introduction of Reese’s caramels, Howard noted in the upgrade statement.
The analyst cited three primary reasons for the upgrade:
- Continued robust top-line growth, driven by an 80% increase in cocoa spot prices over the past year and sugar-driven price escalations. The company is likely to have the capability to implement additional pricing this year, strengthening the top line relative to other U.S. food peers.
- Potential for Hershey to achieve strong gross margins in 2024 based on pricing versus the timing of cocoa hedges.
- Hershey’s stock is presently trading considerably below its typical valuation over the past five years.
“We further believe that although GLP-1 concerns will be more pronounced in chocolate than in meal-based food categories, Hershey has the pricing power and innovation capabilities to continue to drive sales growth in the category, while other parts of the portfolio (and potentially further acquisitions) are likely to support volume growth,” Howard further stated.
HSY Price Action: Shares of Hershey rose by 1.94% to $193.90 in the premarket session on Monday.
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