On Thursday, Deutsche Bank (ETR:DBKGn) announced a downgrade of Mondelez (NASDAQ:MDLZ) International's stock from Buy to Hold, adjusting the price target to $67 from the previous $78. The revision comes amidst concerns over the company's potential acquisition interests and the impact of rising cocoa prices on its valuation.
Trading at $63.12, Mondelez shares are near their 52-week low of $60.33, with the stock down over 11% year-to-date. InvestingPro analysis suggests the stock is currently undervalued based on its Fair Value model.
The bank's analyst pointed out that while Mondelez's current valuation might seem low, there is reduced confidence in the medium-term investment case. This outlook is influenced by the speculative nature of the potential gains from cocoa price fluctuations and the possible acquisition of Hershey Company (NYSE:HSY).
These factors are seen as external to Mondelez's core business performance. The company maintains solid fundamentals with a healthy gross profit margin of 38.8% and revenue of $36.15 billion in the last twelve months.
In addition, the analyst noted that even if the uncertainties regarding the Hershey transaction are resolved quickly, Mondelez's reported outreach to Hershey without a denial has shifted the perception of the company's risk profile. This is due to the increased likelihood of a significant transaction occurring, which brings additional worries about the potential for overpayment and the complexities of integration.
The report highlights the recent unexpected rise in cocoa prices as a factor that has weighed on Mondelez's stock value. The company's apparent interest in acquiring Hershey has also contributed to the change in the investment firm's stance.
In summary, Deutsche Bank's revised outlook for Mondelez International reflects a more cautious position due to the speculative elements currently at play and the implications of the company's strategic moves.
The lowered price target and rating downgrade underscore these concerns. Despite these concerns, the broader analyst consensus remains bullish, with InvestingPro data showing multiple additional insights and a comprehensive Research Report available for deeper analysis of Mondelez's prospects.
In other recent news, Mondelez International has announced a new $9 billion share repurchase program, replacing an existing plan with $2.8 billion remaining.
This move by Mondelez, which generated $36.15 billion in revenue over the last twelve months, has been affirmed by Citi with a reiteration of its Buy rating and a stock price target of $78.00. TD (TSX:TD) Cowen and BofA Securities have adjusted their price targets for Mondelez, citing concerns about rising cocoa prices and foreign exchange headwinds, but maintained their Buy ratings.
Mondelez has also announced the appointment of Volker Kuhn as Executive Vice President and President of its European operations, effective April 1, 2025. This leadership transition is part of Mondelez's strategic planning. Moreover, the company reported robust growth in the third quarter of 2024, with a 5.4% increase in organic net revenue and a significant 28.6% rise in adjusted earnings per share.
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