UPDATE: UBS Downgrades National Beverage (FIZZ) to Sell
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UBS analyst Sean King downgraded National Beverage (NASDAQ: FIZZ) from Neutral to Sell with a price target of $92.00 (from $88.00).
The analyst comments "We downgrade to Sell ahead of difficult compares, mounting competition, and rising input & logistics costs at stretched valuation. We upgraded FIZZ in Jun'19: Always Darkest Before the Comps ahead of easier comps, stabilizing share & velocity trends, and a relative valuation of -1 std dev below its avg. discount. We currently see the opposite setup ahead (+1800 bps Feb-20 to Mar-20 per Nielsen). We acknowledge that FIZZ emerged as a beneficiary of the demand shift to at-home consumption in 2020, but we expect the company to face growing challenges in 2021 on both the topline and margins. On the topline, we expect a gradual improvement in mobility following the vaccine roll-out to result in reduced at-home demand against difficult pantry-loading compares. We expect margins to be pressured from packaging inflation, elevated freight costs, and normalizing category promotions & marketing spend and expect -65 bps decline in FY22E op margins. We expect FIZZ to grow +MSD rate in the years ahead, comparable to peers KO/PEP, which we think justifies a comparable fwd multiple of 23x. At 33x NTM P/E, we see the risk-reward skewed to the downside."
Shares of National Beverage closed at $121.61 yesterday.
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