On Tuesday, BofA Securities adjusted its stance on Davide Campari-Milano Spa (CPR:IM), downgrading the stock from Buy to Neutral and reducing the price target to €6.30 from the previous €8.50. The revision by the firm's analyst comes amid expectations of 2025 being a transitional year for the company.
BofA Securities anticipates an improvement in growth, with organic sales increasing by 3.8% and a margin expansion of 60 basis points, predominantly in the second half of the year. However, the analyst highlighted the current lack of visibility due to leadership changes and weaker-than-expected sell-out trends in the U.S. over the past couple of months, as reported by Nielsen data.
The new drink-driving regulations in Italy, which have been in effect since mid-December, could pose additional short-term challenges for Campari (LON:0ROY). Despite these factors, BofA Securities finds the valuation of Campari shares to be attractive, trading at approximately 17 times the 12-month forward price-to-earnings ratio, which represents a roughly 10% premium to European staples, yet still below historical levels.
The analyst remains positive on the medium to long-term prospects for Campari, recognizing the company's potential for superior top-line growth. Nevertheless, the firm suggests that a re-rating of the stock is unlikely in the near term until there is clearer evidence of sustained growth, which may take several quarters to materialize.
Investors are now observing how Davide Campari-Milano Spa will navigate through the anticipated transitional phase and address the challenges outlined by BofA Securities. The stock's performance will be closely watched as the company aims to demonstrate its ability to achieve the expected growth and margin improvements.
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