On Wednesday, TD (TSX:TD) Cowen adjusted its stance on Brown Forman (NYSE:BFb) (NYSE:BF-B) stock, shifting from a Buy rating to a Hold. The firm also revised its price target for the shares, bringing it down to $48.00 from the previous $50.00. This change reflects the analyst's view that the company's shares will likely remain stable in the medium term, without significant price movement.
The adjustment comes amid expectations of a subdued performance within the broader spirits category, in which Brown Forman operates. The analyst cited weak trends for both Brown Forman and the category as a whole as the basis for the downgrade. There is a belief that the market for spirits is recovering more slowly than anticipated, which could impact Brown Forman's stock performance.
Brown Forman's financial outlook for fiscal year 2025 was also a factor in the rating change. The company's guidance suggests a recovery in the latter half of the forecast period, projecting organic sales growth of 2-4%. However, TD Cowen forecasts that the company's organic sales growth will remain flat, casting doubt on the feasibility of the company's more optimistic projections.
The analyst's comments further underscore the cautious perspective, noting, "We downgrade BFB to Hold and reduce our PT to $48. We believe shares will be range-bound over the medium-term as trends for BFB and the category remain weak. BFB's FY25 guidance appears overly optimistic for a back-half recovery, as we forecast flat organic sales growth (vs. guidance +2-4%)."
The report also highlights negative signals from Brown Forman's peers in the spirits industry, suggesting a broader challenge for companies in this sector. This industry-wide slow recovery is seen as an additional headwind that could affect Brown Forman's stock performance and the analyst's expectations.
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