Deutsche Bank has adjusted its outlook on Fevertree Drinks Plc. (FEVR: LN) (OTC: FQVTF), reducing the price target to £13.25 from the previous £14.50, while maintaining a Buy rating on the stock.
The revision follows Fevertree's announcement of weaker-than-expected financial results for the first half of the year. The company's shares experienced a 12% decline, which was seen as a reaction to the lower sales guidance for the fiscal year 2024, despite positive trading at the start of the second half.
The bank's analysis suggests a cautious stance on the near-term growth expectations for Fevertree due to the difficult conditions within the category.
Nonetheless, there is optimism about the brand's continued market share gains across its product range and various regions. Confidence in the company's gross margin recovery is supported by effective hedging strategies on glass costs, with 70% coverage projected for the fiscal year 2025, and by reduced freight costs.
As a result of the updated guidance from Fevertree, Deutsche Bank has revised its forecasts, leading to adjustments in adjusted earnings per share (EPS) projections. These adjustments indicate an 18% to 11% decrease in EPS estimates from fiscal year 2024 to 2027.
Based on these revised forecasts, Fevertree's shares are now trading at a price-to-earnings (PE) ratio of 22.2x and an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio of 12.3x for the calendar year 2025.
The bank's decision to lower the discounted cash flow (DCF)-derived target price to 1325p from 1450p is a direct consequence of the updated sales guidance and forecast changes.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.