Berenberg raises target price on Fevertree
By Iain Gilbert
Date: Tuesday 28 Jul 2020
(Sharecast News) - Analysts at Berenberg raised their target price on drinks maker Fevertree 's shares from 2,250.0p to 2,350.0p on Tuesday after the group managed to consistently achieve "impressive" off-trade sales growth since the pre-lockdown stockpiling period.
In Berenberg's view, Fevertree's sales growth highlights the brand's strength in more established regions and also provides "encouraging signs" for the expansion potential in growth markets.
Furthermore, the German bank thins continued investment behind the brand will help to drive "a considerable increase" in sales and profits in future years.
Although Berenberg modestly reduced its 2020 earnings estimates for Fevertree by 4% it raised them slightly for future years and reiterated its 'buy' rating on the group.
"Over the following years, we assume the gross margin rebounds moderately and operating costs come down as a percentage of sales, leading to our 2022 profit forecasts rising by circa 2%," said the analysts.
Berenberg added that Fevertree's large net cash position enabled it to focus on long-term growth opportunities rather than worrying about near-term profitability at a time when profit will fall significantly regardless of mitigating actions.
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