On Tuesday, Barclays adjusted its stance on Lindt & Spruengli (LISN:SW) (OTC: LDSVF) stock, shifting from an Equalweight to an Overweight rating and increasing the price target to CHF 120,000 from the previous CHF 110,000.
The upgrade comes with expectations of declining cocoa prices due to improved harvests in West Africa, potentially reducing cost of goods sold (COGS) pressures for the chocolate maker.
The firm believes Lindt is well-positioned to implement the pricing strategies necessary to achieve and even exceed its projected margin growth, which is at the higher end of its 20-40 basis points margin range. This optimism is rooted in the company's consistent track record of organic growth, outstripping its own top-line guidance.
Barclays noted Lindt's impressive growth over the past three years. The company has reported a remarkable 35% aggregate organic growth during this period, with a 13% increase in 2021, followed by 11% in 2022 and 10% in 2023. This performance demonstrates Lindt's capacity to surpass expectations despite significant inflation in cocoa raw material costs.
Alongside the upgrade for Lindt, Barclays also significantly raised its rating for Barry Callebaut, marking the first occasion both European chocolate companies have received Overweight recommendations simultaneously. Moreover, in the U.S. Food sector, the firm has preferred Mondelez (NASDAQ:MDLZ), a leader in chocolate and snacking.
Barclays' optimistic outlook for Lindt underscores the company's potential to double its chocolate market share in the long term, highlighting the firm's view of Lindt as a standout growth stock within the European Staples sector.
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