Keurig Dr Pepper recently received an upgrade from analysts, who believe that the beverage stock is set to experience growth once again. The analysts from Morgan Stanley have raised their rating on Keurig’s shares to Overweight from Equal Weight, while maintaining a price target of $36.
As of midday trading, the stock has already shown positive movement, with a 1.8% increase to $32.33.
Key Reasons for the Upgrade
The analysts have identified three key factors that influenced their decision to upgrade Keurig’s rating:
Growing Market Share: Keurig has been steadily growing its market share in the soft drinks industry, and the analysts believe there is still room for further expansion.
Potential for More Business: With Keurig’s existing presence in the market, there is a possibility for the company to capture even more business in the future.
Industrywide Price Increase: Keurig is benefiting from an industrywide increase in prices, which further supports its growth potential.
Keurig’s Risk and Valuation: A Reimagined Perspective
Keurig, a renowned coffee company, is currently facing some challenges that have affected its stock performance. However, a team of experts from Morgan Stanley believes that these challenges have been blown out of proportion, leading to an unjustifiable decline in the stock’s value.
One of the concerns for Keurig is its coffee segment, which includes its popular K-Cup pods. While the company’s pods are in high demand and are sold by various food chains like Krispy Kreme Doughnuts and Panera, Keurig has experienced a slight decline in market share. Additionally, there is some weakness in the coffee pod industry as a whole. However, it is important to note that Keurig has already adjusted its growth expectations for its U.S. coffee revenue this year.
The second reason highlighted by the Morgan Stanley team is the stock’s current valuation, which they believe is far too low. In fact, this year alone, the stock has fallen by 9.4% based on Dow Jones Market Data. In comparison, competitors like Coca-Cola (KO) and PepsiCo (PEP) have experienced more favorable performance, with declines of 4.8% and gains of 3% respectively.
Earlier this year, Keurig was named as a stock pick by experts due to its promising growth profile, pricing power, and discounted valuation. These factors strongly indicate that the current stock price does not align with the company’s true value and potential.
It is worth noting that a majority of analysts surveyed by FactSet share an optimistic outlook on Keurig. Approximately 53% of analysts rate the company as a Buy, while 42% consider it Neutral, and only 5% view it as a Sell.
In conclusion, Keurig’s stock performance has been overshadowed by certain misconceptions. The concerns surrounding its coffee segment and the undervalued stock price are both factors that need to be reconsidered. With its strong market presence, growth potential, and positive analyst sentiment, Keurig holds great promise for investors seeking long-term returns.
Keurig to Release Second-Quarter Financial Results
Keurig, the renowned coffee company, will be announcing its highly anticipated second-quarter financial results on July 27. Investors and coffee enthusiasts alike are eagerly awaiting this update from the industry leader.
Despite an optimistic outlook for the company’s fiscal years 2023-24, the Morgan Stanley team has slightly revised its projections for the second-quarter coffee sales. This adjustment reflects the company’s commitment to providing accurate and reliable information to its stakeholders.