Kellanova (K), the parent company of Pringles, has seen its stock price target raised by TD Cowen to $73, reflecting the increasing possibility of a takeover.
TD Cowen analysts cited the potential for a merger or acquisition as the driving factor behind the new price target, even though the reported bid from Mars Inc. may not materialize.
"We are raising our price target on Kellanova to $73 to reflect the higher probability of a takeout, even if the reported Mars bid does not play out," analysts stated.
The new price target is based on an 18.0x P/E multiple applied to the firm’s 12-month forward earnings per share estimate, underscoring the strategic appeal of Kellanova to potential acquirers.
TD Cowen believes that a combination between Mars and Kellanova would make strategic sense, although the current status of discussions between the two companies remains unclear.
The analysts emphasized that the possibility of an acquisition justifies the elevated price target, given Kellanova's growth prospects.
Kellanova is expected to continue expanding through increased capacity and growth in international markets. However, the company is currently facing challenges due to significant volume declines, likely caused by excessive price increases.
"Retail data indicates they have raised prices too high and are suffering significant volume declines," TD Cowen noted.
Despite these challenges, the potential for a takeover has boosted optimism around Kellanova's stock, leading to the revised price target. The possibility of a merger or acquisition positions the company as an attractive prospect for investors, according to TD Cowen.