On Friday, investment firm Stifel adjusted its outlook on Danone SA (BN:FP) (OTC: OTC:DANOY), increasing its price target to €72 from €70, while reaffirming a Buy rating for the stock. The revision follows Danone's robust like-for-like (LFL) sales growth reported in the first quarter of 2024.
According to Stifel, Danone's Essential Dairy and Plant-based (EDP) segment is expected to experience a rebound, bolstered by the brand's increasing momentum. The firm anticipates that the company's upcoming Capital Markets Day (CMD) could serve as an additional catalyst for the stock. Stifel also suggests that there is potential for Danone to raise its financial guidance either at the CMD in June or alongside the first-half results of 2024.
Stifel's valuation of Danone is derived from an equal blend of a discounted cash flow (DCF) model, which assumes a weighted average cost of capital (WACC) of 7.5%, a beta of 1.4, and a long-term growth (LTG) rate of 1.5%, and a sum-of-the-parts (SOTP) analysis. Currently, Danone's shares are trading at a discount compared to the sector and its peers, with a 12.0x enterprise value to earnings before interest and taxes (EV/EBIT) multiple, versus the sector's 15.2x and Unilever (LON:ULVR)'s 12.9x.
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