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Investing.com – RBC Capital Markets upgraded its investment stance on Nestle (SIX:), saying the Swiss food conglomerate has not suddenly become a bad company despite its poorly received full-year results.
RBC lifted its view on Nestle to ‘sector perform’ from ‘underperform’, while trimming its 12-month price target to CHF96 from CHF97.
The company’s 2023 results and 2024 guidance were received very poorly by the market, with its share price slumping 5% on the day.
However, this drop seemed overdone, RBC said, given much of what analysts and investors appeared to have been concerned about has been evident for some time, namely the stretching nature of mid-single digit sales growth and 17.5-18.5% EBIT margin targets, the need to step up marketing investment and weak historical cash conversion.
“When we downgraded Nestle to ‘underperform’ a year ago our argument was not that there was some sort of impending calamity, but rather that it ‘is still a food company and should be valued accordingly’,” said RBC.
“The share price now more fairly reflects some of Nestle’s vulnerabilities as well as its myriad qualities.”
Nestle stock fell 0.4% Tuesday to CHF93.90.
