Deutsche Bank downgrades Fever-Tree, says Molson Coors deal 'lacks near-term fizz'
By Michele Maatouk
Date: Monday 10 Feb 2025
(Sharecast News) - Deutsche Bank downgraded Fever-Tree Drinks on Monday to 'hold' from 'buy' and slashed the price target to 800p from 1,325p as it said the deal with Molson Coors "lacks near-term fizz".
Fever-Tree announced last month that the Coors Light maker would be buying an 8.5% stake in the posh tonic maker for £71m in cash, with the proceeds set to be returned to shareholders via a share buyback programme.
The company said it had entered into a long-term strategic partnership with Molson Coors for the exclusive sales, distribution and production of the Fever-Tree brand in the US.
Deutsche bank said that initially, it thought the deal with Molson Coors represented a positive move for the Fever-Tree brand in the US and the overall investment case for the equity.
"Having modelled out the details of the partnership, we still think it is a positive strategic step for the US growth opportunity but the negative impact on the near term financials mean any potential meaningful upside is several years away, in our view," it said.
DB said the partnership arrangement fundamentally changes the group margin recovery opportunity, which its previous 'buy' case was predicated on.
"Previously, we modelled group adjusted EBITDA margins recovering to mid-twenties by FY28E, which underpinned a more than 40% adjusted EPS compound annual growth rate across FY24-28E," it said.
"On our updated forecasts, the new structure limits margin progression to 17% by FY28E, and indicates 17.5% adjusted EPS CAGR over the same time frame."
At 0920 GMT, the shares were down 2.2% at 702.50p.
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