Shares of Hershey Co HSY surged in premarket trading on Monday.
Recent months have seen a significant improvement in the candy company’s market share and volume trends, according to Bernstein.
The Analyst’s View: Alexia Howard upgraded the rating for Hershey from Market Perform to Outperform, while also raising the price target from $220 to $235.
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Driving Factors: The company’s trends have improved since the launch of Reese’s caramels, Howard said in the upgrade note.
The analyst outlined three significant reasons for the upgrade:
- Robust top line growth continues with cocoa spot prices up around 80% over the past year and sugar-driven price hikes. The company is likely to have “ample ammunition to push through additional pricing this year to strengthen the top line relative to other U.S. food peers,” she wrote.
- Hershey could record good gross margins in 2024 “based on pricing vs. the timing of cocoa hedges.”
- Hershey’s stock is currently trading meaningfully 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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