On Tuesday, Citi adjusted its financial outlook for Heineken (AS:HEIN) NV (HEIA:NA) (OTC: HEINY (OTC:HEINY)), reducing the price target to €99 from €105, while retaining a Buy rating on the stock. The adjustment follows a period of lowered earnings forecasts and communication challenges which have impacted investor confidence in Heineken's earnings potential.
According to the firm, despite the recent challenges and additional reductions to fiscal year 2024 and 2025 estimates, it is not the time to give up on the beer giant. Citi anticipates an improvement in volumes and margins for fiscal year 2025 as certain market-specific headwinds begin to dissipate. Additionally, a more coherent strategy in guidance and messaging is expected to emerge, which could help Heineken become the stable growth stock that management aims for.
The firm acknowledges that due to the unpredictability experienced in the past few years, it will require time and consistent performance for these positive changes to be reflected in Heineken's stock valuation. Citi describes Heineken as a "show-me" stock, indicating that while there is potential for a significant upside of over 24% within a 12-month period, tangible catalysts for a sustainable re-rating might not materialize until later in the first half of fiscal year 2025.
In conclusion, Citi's stance on Heineken remains optimistic in the long term, despite the near-term challenges and absence of immediate catalysts for a stock re-rating. The firm's revised price target reflects a cautious but hopeful outlook for the company's financial performance in the coming years.
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