On Thursday, BofA Securities made a bullish move on Utz Brands (NYSE:UTZ), upgrading the stock from Neutral to Buy, and lifting the price target to $22.00 from the previous $19.00. The basis for this optimistic revision is an increased confidence in the company's ability to meet its long-term sales goals and the potential for earnings growth and a higher valuation multiple.
The upgrade follows a recent BofA Consumer Conference in Miami earlier this week, where Utz Brands' CEO Howard Freidman and CFO Ajay Kataria presented. The discussions at the conference have reinforced BofA Securities' belief in the company's strategic plan to achieve a sales growth rate of 4-5% by the end of the fourth quarter of 2024, extending into 2025.
Despite observing a general slowdown in the salty snack category volumes, BofA Securities anticipates that Utz will continue to increase its market share. This expectation is supported by the company's ongoing efforts to expand its geographic distribution and to boost the average number of items per retail outlet.
BofA Securities also references insights from Utz's investor day in December 2023, suggesting that the company's target EBITDA margin of 16% by 2026 might be on the conservative side. This assessment is made in light of the fact that Utz's peers, such as CPB and K, have set their targets around 20%.
The firm's valuation of Utz shares is now pegged at 18 times the estimated 2025 EV/EBITDA, an increase from the previously estimated 15.5 times.
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