On Wednesday, DA Davidson adjusted its price target for Mondelez (NASDAQ:MDLZ) International (NASDAQ:MDLZ), a leading global snack company, to $75 from the previous target of $80, while maintaining a Buy rating on the stock. The revision reflects a more conservative valuation approach due to challenges in the market.
The firm based the new twelve-month price target on approximately 15.5 times the forward twenty-four months EBITDA estimate of $7,644.8 million. The firm applied an approximately 11% discount, which is the difference between Mondelez's five-year historical average and its trough, to a blend of current and historical EV/EBITDA multiples of Specialty Food & Beverage peers. This calculation takes into account the historically high cocoa prices and the current pressure on snacking demand in North America.
Additionally, DA Davidson factored in Mondelez's equity method investments, which total $2.5 billion, to arrive at the new valuation. Historically, Mondelez has traded at a roughly 7.5% discount to its peer group over the last five years. However, it is currently trading at an approximately 11% discount.
The price target adjustment comes at a time when the company is facing heightened costs for key commodities like cocoa, as well as a challenging demand environment in its North American market. Despite these headwinds, DA Davidson's continued Buy rating indicates a positive outlook on Mondelez's stock performance going forward.
InvestingPro Insights
Mondelez International (NASDAQ:MDLZ) stands resilient with a robust market capitalization of $89.94 billion and displays a promising revenue growth of 9.85% in the last twelve months as of Q1 2024. This growth narrative is further supported by a solid gross profit margin of 41.69%, reflecting the company's efficiency in managing its cost of goods sold amidst the fluctuating commodity prices. Investors may find Mondelez's adjusted P/E ratio of 16.92 particularly attractive, signaling a potential undervaluation relative to its earnings capacity.
With a forward-looking perspective, Mondelez's dividend yield of 2.54% coupled with a dividend growth of 10.39% in the last twelve months as of Q1 2024, suggests a commitment to returning value to shareholders. This is a reassuring sign for investors seeking both growth and income. Additionally, the company's fair value, as estimated by analysts, stands at $79, while InvestingPro's fair value assessment is slightly lower at $77.42, offering a window into the stock's potential upside.
For those interested in further insights and metrics to guide their investment decisions, InvestingPro provides additional tips on Mondelez and other stocks. With the use of coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking access to a comprehensive suite of tools and data. There are numerous additional InvestingPro Tips available that can help investors navigate the market with greater confidence.
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